Knott Investments Pty Ltd v Winnebago Industries, Inc

schedule 2 Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1417 of 2012

SYDNEY CAMPERVAN & MOTORHOME RV CENTRE PTY LTD (ACN 112 316 560)

BRISBANE RV'S CARAVANS AND CAMPERS PTY LTD (ACN 102 806 520)

A & K CARAVANS AND MOTOR HOMES PTY LTD (ACN 100 888 748)

JUDGE: ALLSOP CJ, COWDROY J AND JAGOT J DATE: 17 october 2013 PLACE: SYDNEY

ALLSOP CJ 1 On 7 June 2013, judgment was delivered allowing the appeal against orders made by the Court on 6 September 2012: Knott Investments Pty Ltd v Winnebago Industries, Inc [2013] FCAFC 59. The appeal was allowed, but only on a question of the appropriate relief in all the circumstances. Some orders were made by the Court in June, but the parties were invited to put further submissions on orders and costs. They did so in June and July. There has been some delay in the hearing of argument in the matter, not the fault of the parties. 2 I will employ the same abbreviations as in the earlier judgment. These reasons assume a familiarity with those reasons. 3 Before addressing each of the major differences in approach between the parties, a number of matters should be stated that guide the form of relief. First, the respondent Winnebago was not enforcing a trade mark. Its suit was for passing off and in respect of misleading or deceptive conduct. (I leave aside claims not presently relevant.) Thus, the central consideration is the prevention of deception, not mere confusion as to trade origin. Secondly, although Mr Binns and Knott were to a degree attempting to exploit such goodwill and reputation of Winnebago as existed in Australia, he and it built their own business in Australia, to the knowledge of Winnebago. At least some of Knott's reputation in the use of the name and logo was the product of the development of its own goodwill and reputation. Not all of the development of its business involved the taking advantage of Winnebago's reputation in Australia: see [67] and [68] of the judgment of June 2013. Thirdly, the primary guiding principle of the injunctive relief should be, so far as possible, the protection of the public from being misled. 4 There appears an underlying tension inherent in any relief. On the one hand, Knott has built up over 25 years or more its reputation in the name and marks; on the other hand, to a degree, there has been a taking advantage of the respondent's reputation and goodwill that spilled over from overseas to Australia. The main judgment recognised a need to avoid injustice to Knott by relief that denied the legitimacy of the building of its own reputation. That said, the protection of the public and of the respondent's trade reputation requires orders to be made that will prevent any continuation of the capacity of Knott to mislead those people in Australia who have a familiarity with the respondent's reputation and who are likely to be misled by the use of the name and logo. Thus, the apparent underlying tension is resolved by keeping firmly in mind, at all times, these guiding considerations. 5 To the extent that there may be either some clumsiness or impracticability in framing orders so guided, that can be seen as the product of both Knott's seeking to take advantage of the respondent's reputation and the respondent effectively doing nothing to protect its own reputation for 25 years.

The question of order 4 made by the Court in September 2012 6 The orders made by the Full Court in June this year set aside orders 5 and 6 made at first instance, but not order 4. Order 5 had required the eleventh respondent to the primary action to surrender the Winnebago corporate name. Order 6 had required all respondents to the primary action to cancel domain names using the Winnebago name. Thus the Full Court's orders (as a consequence of the setting aside of orders 5 and 6) would permit the use of the name, subject to the clear distinction of origin referred to at [68] and [78] of the main judgment. 7 Order 4 remained, however, and was not set aside. It provided for the cancellation of any business names containing or consisting of Winnebago. Winnebago accepts that the effect of the Full Court's reasoning is that paragraph 4 of the Court's orders of September 2012 should be set aside.

The use of the stylised name and logo 8 The two forms of the stylised logo (using the name, Winnebago and a flying "W") are set out at [3] and [4] of the primary judge's reasons: Winnebago Industries, Inc v Knott Investments Pty Ltd (No 2) [2012] FCA 785. 9 The respondent Winnebago seeks an absolute restraint upon the use of the stylised mark. It submits that no disclaimer can prevent deception. The reasoning in the main judgment accepted that the reputation Knott had built up for itself included the use of the stylised logo. To order an absolute restraint would be contrary to the reasoning in the main judgment, but if one were persuaded that no step of differentiation could neutralise the misleading effect, that inconsistency might have to prevail. The earlier reasons were not as finely focused on relief as these. I am unpersuaded, however, that an appropriately expressed and positioned disclaimer of differentiation would not be adequate to prevent any future deception. Thus, I would reject the primary submission of Winnebago.

The nature of the disclaimer of differentiation 10 The submissions of the respondent Winnebago, as they ultimately developed during argument, were that if the appellants were not permitted to use the stylised logo, then the terms of an order that the disclaimer be clearly and prominently displayed, would be adequate protection. If, however, Knott is to be entitled to use the logo, Winnebago submitted that the disclaimer should be "in text of equal size and prominence to that of the Winnebago name". 11 The appellants resisted this, submitting that it was an attempt to force the disclaimer into the brand, thus denying, it was submitted, the entitlement recognised by [67] of the earlier judgment to use the logo. The appellants referred to what Knox CJ had said in Turner v General Motors (Australia) Pty Ltd [1929] HCA 22; 42 CLR 352 at 360-361 about the form of the order. There Knox CJ referred with approval to what had been said by Lord Macnaghten in Reddaway v Banham [1896] AC 199 at 221, who in turn had approved of the form of the order in R Johnston & Co v Archibald Orr Ewing & Co (1882) 7 App Cas 219 at 233-234. In Reddaway v Banham Lord Macnaghten said that: in all cases where the defendant is to be restrained from using unfairly words or marks which he is at liberty to use provided only they are used fairly, it would be better that the injunction should go in the form approved by this House in Johnston v Orr-Ewing …". (Emphasis added) That order, followed by the High Court in Turner was in terms that included the phrase "without clearly distinguishing such ticket from the plaintiffs' ticket." 12 Given the variety of contextual circumstances in which a word and a logo may appear, the good sense of that approach commends itself. That is not to say that, in some contexts, a fair use might not require a disclaimer of differentiation immediately adjacent to the use in prominent type. 13 For these reasons, I would accept the appellants' arguments as to the inappropriateness of an order requiring an equivalent text size. That said, it is perhaps implicit in the words "clearly" and "prominently" that the disclaimer will be spatially reasonably proximate to the use of any name, mark or logo. That spatial relationship should be made explicit in the orders, except for the order dealing with television advertising, where "clearly and prominently" together with a voice over is appropriate, and dealing with radio advertising where a voice over is provided for. 14 The appellants objected to the disclaimer appearing fixed upon the vehicles sold. I see every reason for the disclaimer of differentiation to be placed on the vehicle. No doubt most buyers of these vehicles will inspect before purchasing. The disclaimer should be clear and prominent by reference to the position and use of the name and logo. 15 As to the text of the disclaimer, the parties put forward competing versions. Knott suggested the following: CONSUMER NOTICE Our Winnebago motorhomes are manufactured by Avida, an Australian business, not associated with the USA Winnebago

16 The respondent Winnebago suggested the words: "This vehicle was not manufactured by, or by anyone having any association with, Winnebago of the United States" 17 In my view, Winnebago's suggested wording is preferable. It focuses on the essential negative of the message: that it is NOT associated with Winnebago USA. 18 The parties were at issue as to how the disclaimer should be used in relation to the use of the corporate name, otherwise than in the actual promotion and sale of vehicles. The respondent Winnebago sought an order that required (in text of equal size and prominence) the (Knott) Winnebago company or business name to state that it was not and had no association with Winnebago of the United States. The appellants object to this as impractical, citing difficulty of registration of business name and the placement of such name on tax returns and cheques. 19 I am of the same view as earlier expressed as to the need for equivalent text. That said, any impracticality that attends such orders only exists because of the potential deception caused by Mr Binns and Knott seeking to take advantage of such reputation as Winnebago had in Australia and the misleading or deceptive consequences thereof. With appropriate changes as to the requirement of text size, the order sought by Winnebago should be made. 20 In its written submissions Winnebago sought delivery up in terms of order 3 that the Full Court had set aside. In effect, the respondent Winnebago sought a rescission of the Full Court's orders, insofar as they had set aside order 3 made by the Court at first instance. As was recognised in debate on appeal, the validity of this request depended upon the success of the absolute prohibition of the use of the stylised logo. I have rejected that course; thus, this request should be rejected. 21 The respondent Winnebago also sought an order requiring the appellants to require a buyer or hirer of a vehicle to sign a form stating that they had been informed of the disclaimer. This was opposed by the appellants as unduly onerous. They submitted that it "would turn the entire sales transaction into a legalistic and disconcerting experience for the customer". They submitted that the requirement is devoid of authority to support it. 22 It must be accepted that the order would be novel. That said, the circumstances here are unusual. One of the difficulties faced by the respondent Winnebago (albeit partly a product of its own inaction) is knowing whether, in the future, its reputation may be traded off. This is also a difficulty for the Court, especially with the continued use of the logo. The aim of the orders is to prevent any future trading off Winnebago's reputation and to prevent the misleading of the public. The prevention of these things is not an exercise in precision. It must recognise the temptation involved in every-day trade and business. It must withstand the test of time. The relief should be such that the Court is satisfied it will prevent deception. Clear and prominent disclaimers of differentiation advance that satisfaction. It must be recalled, however, that the appellants will be permitted to use, fairly, a trade logo. That fairness is to be brought about by information being clear and prominent as to a lack of connection between the appellants and respondent. Such an order can be seen to add a measure of protection to the public as it requires a written acknowledgment that the person buying or hiring has been informed of that information differentiating the origin of the goods. 23 I was initially opposed to ordering this course. I think, however, it is an appropriate additional protection for the public, that will assist in ensuring as far as reasonably and fairly possible, members of the public are not deceived as to the trade origin of these vehicles and of the business in question.

Pecuniary remedies 24 The respondent Winnebago sought remitter of the entitlement to pecuniary relief. As to an account of profits, there should be no remitter. An account is an equitable remedy. The extraordinary delay is an overwhelming consideration in this regard. Further, it would be extraordinarily difficult to ascertain, years after the event, what profits have been made by reference to sales that could be seen to be produced by trading on the respondent's reputation and sales produced by Knott trading on its own reputation. As a matter of discretion, that almost impossible task should not be allowed to vex the appellants. 25 As to damages, there should be no remitter for any damage suffered prior to six years from the commencement of the action. 26 As to damages after that date, the respondent Winnebago sought a remitter for a hearing based on a reasonable royalty. This was opposed by the appellants on the basis that the evidence was clear that Winnebago would not have licensed its name to Knott. The respondent recognised that there was Full Court authority in its path: Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq) [2007] FCAFC 40; 157 FCR 564 at 569 [27]-[28]. It sought, however, remitter in this regard to attempt to deal with this authority by reference to cases which recognise that the use of property (here the reputation of the respondent) may be compensated for by reference to notions (perhaps restitutionary in essence) that unauthorised use of property has to be paid for: see generally the discussion of issues in the context of conversion in Bunnings Group Ltd v CHEP Australia Ltd [2011] NSWCA 342; 82 NSWLR 420 at 464-470 [166]-[186]. 27 The opportunity to argue these matters should not be denied to the respondent by a consideration of relief at this stage: cf Spencer v The Commonwealth [2010] HCA 28; 241 CLR 118 at 131-132 [24]-[25]. It may be that it will be necessary to argue that there is error in a judgment of the Court. The respondent should not be shut out from that enterprise. 28 There is, however, force in the contention of the appellants put in the alternative that the remitter on damages after 2004 should be on terms that Winnebago adduce evidence satisfactory to persuade the primary judge that a hearing on damages since 2004 will serve some useful purpose in there being some prospect of a substantial (that is, real) award.

Costs 29 Costs should be looked at realistically as to which party has won and which has lost. Undoubtedly, the appellants have lost on almost all issues. They argued that Winnebago had no reputation; that, if it did, it had lost it, that Winnebago authorised its conduct, and that it had not set out to trade off its reputation. It has won on relief only, based on the uncontested lack of diligence in Winnebago protecting its own rights. The appellants submitted that all the evidence would have been led to contest relief. No doubt some would have been. But a case in which the only argument was relief would have been much shorter; as would the appeal. In my view, a fair reflection of the relevant event and a just resolution of the costs question is that the appellant be ordered to pay 75% of the respondent's costs of the trial and the appeal.

Order 8 30 The respondent accepted that order 8 made in September 2012 was one of a holding nature that should be discharged.

Orders 31 The orders that I would make in addition to the orders made on 7 June 2013 are as follows:

1. Set aside order 4 made by the Court on 6 September 2012.
2. Discharge order 8 made by the Court on 6 September 2012.
3. In lieu of orders 1, 4, 5 and 6 made by the Court on 6 September 2012: (1) Each of the appellants, whether by itself, its officers, servants, agents or otherwise howsoever, be permanently restrained, without the licence or consent of the respondent, from using in trade or commerce in Australia, in connection with the manufacture, promotion or sale of recreational vehicles: (a) the Winnebago name; (b) any other name or mark substantially identical with, or deceptively similar to, the Winnebago name; (c) the Winnebago logo, being the Winnebago name represented in a stylised manner as shown in Schedule 1 to these orders; (d) the W logo, being the letter "W" represented in a stylised manner as shown in Schedule 2 to these orders; and (e) any other name or mark or logo substantially identical with, or deceptively similar to, the Winnebago or W logos, without: (f) where the name, mark or logo is used on one or more vehicles or in a document (including any print advertisement or webpage), stating in any relevant document (including any print advertisement or web page) or on any vehicle, clearly and prominently, and reasonably proximate to any name, mark or logo: (i) (where the name, or mark or logo is used on or in relation to a single vehicle) "This vehicle was not manufactured by, or by anyone having any association with, Winnebago of the United States"; or (ii) (where the name, or mark or logo is used on or in relation to more than one vehicle) "These vehicles were not manufactured by, or by anyone having any association with, Winnebago of the United States"; (g) where the name is used in a radio commercial, stating by a clear and prominent voiceover of no less than 10 seconds: "These vehicles were not manufactured by, or by anyone having any association with, Winnebago of the United States"; and (h) where the name, mark or logo is used in a television advertisement, stating clearly and prominently and by a clear and prominent voiceover of no less than 10 seconds: "These vehicles were not manufactured by, or by anyone having any association with, Winnebago of the United States".
4. Each of the appellants, whether by itself, its officers, servants, agents or otherwise howsoever, be permanently restrained, without the licence or consent of the respondent, from using in the name of any corporation or business: (a) the Winnebago name; and (b) any other name or mark substantially identical with, or deceptively similar to, the Winnebago name, without stating clearly and prominently and reasonably proximate to any such name or mark: "This company is not, and has no association with, Winnebago of the United States".
5. Each of the appellants, whether by itself, its officers, servants, agents or otherwise howsoever, be permanently restrained, without the licence or consent of the respondent, from selling, hiring or otherwise dealing in vehicles bearing the Winnebago name without first requiring purchasers, hirers or persons otherwise acquiring an interest in such vehicles to sign a form stating that they have been informed that those vehicles were not manufactured by, or by anyone having any association with, Winnebago of the United States.
6. Remit for hearing the issue of damages from the date in 2004 six years before the commencement of proceedings, subject to Winnebago Industries, Inc persuading the judge on remitter that there is utility in a hearing for damages.
7. In lieu of order 10 made on 6 September 2012: The respondents pay 75% of the applicant's costs of and incidental to the hearing up to 6 September 2012.
8. The appellants pay 75% of the respondent's costs of the appeal.
9. The term "recreational vehicles" when used in order 3(1) above does not include second-hand recreational vehicles manufactured by the first appellant and to which the Winnebago name, the Winnebago logo or the W logo was applied at the time of manufacture.

schedule 2 I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop.

Cowdroy j 32 I agree with the reasons of the Chief Justice and the orders proposed by him. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy.

Jagot j 33 I agree with the reasons of the Chief Justice and the orders proposed by him. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.