Additional/exemplary damages
74 The applicants claim additional damages under s 115(4) of the Copyright Act 1968 (Cth) and under s 126(2) of the Trade Marks Act 1995 (Cth) as against Prestige Premium Deals and Mr Christopher and parallel exemplary damages as against the remaining two respondents.
75 Section 115(4) of the Copyright Act provides:
(4) Where, in an action under this section:
(a) an infringement of copyright is established; and
(b) the court is satisfied that it is proper to do so, having regard to:
(i) the flagrancy of the infringement; and
(ia) the need to deter similar infringements of copyright; and
(ib) the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff's copyright; and
(ii) whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form; and
(iii) any benefit shown to have accrued to the defendant by reason of the infringement; and
(iv) all other relevant matters;
the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.
76 Section 126(2) of the Trade Marks Act provides:
(2) A court may include an additional amount in an assessment of damages for an infringement of a registered trade mark, if the court considers it appropriate to do so having regard to:
(a) the flagrancy of the infringement; and
(b) the need to deter similar infringements of registered trade marks; and
(c) the conduct of the party that infringed the registered trade mark that occurred:
(i) after the act constituting the infringement; or
(ii) after that party was informed that it had allegedly infringed the registered trade mark; and
(d) any benefit shown to have accrued to that party because of the infringement; and
(e) all other relevant matters.
77 In order to be eligible for an award of additional (and by some degree of parity of reasoning, probably exemplary damages) at least some entitlement to compensatory damages seems necessary: Facton at 577 [32].
78 Both sides sought to gain some support for their respective arguments from the summary of the applicable principles in relation to additional damages by Wigney J in Truong Giang Corporation v Quach [2015] FCA 1097; (2015) 114 IPR 498 at 519-521 [129]-[140]:
[129] Section 126(2) was inserted into the TM Act by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth) (the Amending Act). It is in very similar terms to s 115(4) of the Copyright Act 1968 (Cth), s 122(1A) of the Patents Act 1990 (Cth) and s 75(3) of the Designs Act 2003 (Cth). The apparent purpose of the insertion of s 126(2) was to bring the TM Act into line with those other intellectual property laws. That purpose was specifically adverted to in the second reading speech in relation to the Amending Act.
[130] The explanatory memorandum that accompanied the Amending Act indicated, among other things, that s 126(2) was intended to provide a means by which the court could provide an effective deterrent. The explanatory memorandum included the following passage:
Additionally, stakeholders have submitted that many counterfeiters do not maintain sufficient business records to enable a satisfactory calculation of ordinary damages or an account of profits: purely nominal damages may be regarded by counterfeiters as merely the "cost of doing business", rather than an effective deterrent. The absence of additional damages under the Trade Marks Act limits the ability of a court to provide an effective deterrent to intentional counterfeiting. [Footnotes omitted.]
[131] That passage is particularly apposite to the circumstances of this case.
[132] While there is little authority concerning s 126(2) of the TM Act, given its similarity to s 115(4) of the Copyright Act, it is relevant to consider the following principles that have been applied to that section.
[133] First, it is not necessary that any amount of additional damages be proportionate to any award of compensatory damages: Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 2) (2008) 76 IPR 763; [2008] FCA 746 (Futuretronics) at [17].
[134] Second, an award of additional damages involves an element of penalty: Facton Ltd v Rifai Fashions Pty Ltd (2012) 199 FCR 569; 287 ALR 199; 95 IPR 95; [2012] FCAFC 9 (Facton) at [33], [89].
[135] Third, part of the function of an award of additional damages is to mark the court's disapproval or opprobrium of the infringing conduct: Facton at [36].
[136] Fourth, the matters set out in s 126(2)(a)-(d) of the TM Act are not preconditions to an award of additional damages: Futuretronics at [17].
[137] Fifth, conduct which may properly be seen as flagrant includes conduct which involves a deliberate and calculated infringement, a calculated disregard of the applicant's rights, or a cynical pursuit of benefit: Futuretronics at [19]; Facton at [92].
[138] Sixth, post-infringement conduct within s 126(2)(c) of the TM Act is unlikely to include the respondent's conduct of the infringement proceedings. Such conduct is more relevant to the appropriate order as to costs: Futuretronics at [17]; Flags 2000 Pty Ltd v Smith (2003) 59 IPR 191; [2003] FCA 1067 at [31]-[34]. That said, it is difficult to see why some aspects of the conduct, by a respondent, in defence of infringement proceedings, might not be relevant to the award of additional damages: compare Facton at [44], [69]. Conduct of the proceedings which involved high-handedness, dishonesty, recalcitrance, or flagrant disregard of, or deficiencies in compliance with, discovery orders or notices to produce, might, at the very least, suggest a greater need for an award of additional damages that would deter future infringing conduct by the respondent.
[139] Seventh, an award of additional damages can encompass damages which, at common law, would be aggravated or exemplary damages: Futuretronics at [17]. The matters specified in s 126(2) of the TM Act are of a kind which are taken into account in determining whether a party is entitled to aggravated or exemplary damages at common law, but in the end result the damages to be awarded are not aggravated or exemplary damages, but additional damages, being of a type sui generis: Facton at [33]-[36], [91].
[140] In Halal Certification Authority Pty Ltd v Scadilone Pty Ltd (2014) 107 IPR 23; [2014] FCA 614 at [111], Perram J considered that if additional damages are appropriate, the damages to be awarded must operate as a sufficient deterrent to ensure that the conduct will not occur again.
79 For completeness, it should be observed:
(1) that neither exemplary nor aggravated damages can be awarded in relation to the misleading or deceptive conduct statutory contraventions because those provisions are confined to compensatory damages for proven loss: Musca v Astle Corporation Pty Ltd (1988) 80 ALR 251 at 262; and
(2) that exemplary damages for passing off should not be awarded on top of additional damages for copyright and/or trade mark contraventions: Facton at 573 [9]-[11]),
such that the award of additional damages is as against Prestige Premium Deals and Mr Christopher for trade mark and copyright infringement, while an award so far as it applies to the second and third respondents (respectively United Prestige Clearance and United Prestige Group) it is an award of exemplary damages for passing off only.
80 The quoted passages from Truong Giang reproduced above indicate that the key features of an additional damages assessment are that:
(1) there is no need for proportionality to compensatory damages (although as noted below there is nothing to indicate that that is a forbidden consideration or benchmark);
(2) an award involves an element of penalty;
(3) judicial disapproval has a part to play;
(4) the terms of the statutory provision as to the non-exhaustive matters that can be taken into account in considering an award of additional damages do not constitute a precondition for them to be awarded;
(5) flagrant conduct includes that which is deliberate and calculated in disregard of the injured party's rights, or a cynical pursuit of benefit;
(6) post-infringement conduct such as in the conduct of the proceedings is relevant more to costs than to additional damages but not irrelevant;
(7) additional damages encompass but are not the same as aggravated or exemplary damages at common law; and
(8) specific deterrence has a part to play, including general deterrence.
Similar reasoning can be applied to the assessment of exemplary damages (except as to statutory provisions and construction).
81 Although it is not perhaps ideal conceptually, the different pathways of additional damages or exemplary damages for the first and fourth respondents, and exemplary damages only for the second and third respondents can be used to produce a single additional/exemplary damages figure, awarded jointly and severally.
82 Additional damages and exemplary damages may be seen as encompassing broad concepts not always readily amendable to precise measurement or quantification. This includes having regard to capturing aspects of loss that have not been able to be ascertained because of the imperfect nature of litigation and evidence gathering in reflecting all aspects of wrongdoing and the total damaging effect of infringing or contravening conduct. It also entails giving a dollar figure to otherwise intangible considerations of punishment, giving effect to judicial disapproval and sanction and future-looking considerations of specific and general deterrence.
83 Having regard to the statutory set of criteria in s 115(4) of the Copyright Act and in s 126(2) of the Trade Marks Act, and applying parity of reasoning in relation to exemplary damages, the following points can be made about these overlapping considerations:
(1) the copyright infringements, trade mark infringements and passing off were on any view flagrant and highly deceptive, taking place over a substantial period of time and with a virtual certainty of the counterfeit Bio-Oil being taken to be genuine Bio-Oil by both consumers and retail pharmacists;
(2) there is a substantial need to punish and to deter, both in respect of the respondents specifically and any other would be contravener generally - indeed, to borrow from the civil penalty jurisprudence, it might be said that it is important to make sure that it is seen to be simply "not worth the candle" for anyone else to engage in such conduct in the future: see Australian Securities and Investments Commission v Vizard [2005] FCA 1037; (2005) 145 FCR 57 at 68 [48];
(3) the conduct of the respondents after what they had done was detected and indeed litigated was uncooperative and obstructive, including defying orders made by three separate Judges of this Court over several years, as detailed in the default judgment reasons, and wrongdoing has never been acknowledged, let alone admitted - as Wigney J observed in Truong Giang at [138], reproduced above, conduct of the proceedings which involved "high-handedness, dishonesty, recalcitrance, or flagrant disregard of, or deficiencies in compliance with, discovery orders or notices to produce, might, at the very least, suggest a greater need for an award of additional damages that would deter future infringing conduct by the respondent";
(4) although not precisely quantified, it is clear that there was a substantial financial gain made by the respondents or at least one or more of them by selling to pharmacies counterfeit Bio-Oil in place of genuine Bio-Oil, a premium and premium-priced product - as noted at [57] above, a gross figure of $681,309 was paid to overseas suppliers by Prestige Premium Deals, so it is reasonable to infer that a substantial profit was made or intended to be made to recoup that cost and make a substantial profit on top of that;
(5) genuine Bio-Oil is a healthcare product for which a premium price is paid by consumers, who are entitled to trust that they are getting what they paid for, a factor that feeds back into the need for deterrence, but also as a matter of public confidence that such behaviour is taken seriously by the Courts.
84 Additional damages and exemplary damages, even with the particular features identified above, are not amenable to precise mathematical calculation and there is no single right or wrong figure. It is very much in the nature of judicial discretion involving a measure of what might be described as instinctive synthesis (borrowing that term from criminal law sentencing principles to explain a complex and multi-factorial discretionary decision-making process of a non-mathematical nature used to produce a numerical outcome).
85 The applicants sought additional damages of $300,000. Taking all of these considerations into account and attempting to arrive at an outcome that is just and proportionate, I consider that an award of additional damages of $212,500 is fair, reasonable and appropriate, being half the award of compensatory damages. While there is no principle that requires any linkage between the two, nor is taking that into account proscribed. In this case, the compensatory damages sum provides a useful yardstick and provides a coherent rationale for the figure arrived at. It meets any suggestion that the award is either arbitrary or impressionistic. The respondents should be ordered to pay that amount to Union-Swiss, unless the applicants are able to advance a compelling reason for the award to be in favour of both.