Koninklijke Philips Electronics N V v Remington Products Australia Pty Ltd

The device - use as trade mark? 3 The device in question is depicted in par 12 of the reasons of 18 June. I shall not attempt to copy it again, but some description may help. The device is in the form of a square. In coloured versions, the background colour within the square is blue. In the centre of the square there is a representation, in black and white, of the shaving heads of the Remington product. Projecting from the shaving heads are eight broad arrows. In the coloured version, those pointing (to adopt the points of the compass) north, south, east and west are coloured red, the colour progressing from relatively light at the base to relatively deep at the point. The arrows pointing northeast, southeast, southwest and northwest are, in the coloured versions, purple; again, the colour is lighter at the base and deeper at the point. The graduated colours result in what may be described as a halo effect at the base of the arrows, around the heads. 4 The representation of the shaving heads at the centre of the device is very similar to the three‑dimensional mark. Remington made no submissions on the subject of similarity. The only issue is whether, in the particular instances complained of, Remington has used the device as a trade mark. Those instances were narrowed, in argument, to three. One is the use of the device on the packaging of the Remington product; the second is its use in a brochure made available to the "trade", not directly to consumers (see par 34 of the reasons of 18 June); and the third is its use in press advertisements published by Remington. Counsel engaged in some limited discussion of authority, but I do not propose to cite authority, for two reasons: the principles and a number of the leading authorities are discussed in the reasons of 18 June and there is no point in repeating the discussion. There was no disagreement about the test to be applied: has Remington used the device to indicate, or partly for the purpose of indicating, the origin of the Remington product or of its quality? 5 The device appears on the back of the packaging of the Remington product. It is printed, in colour, beside a picture, in black and white, of a single shaving head with a cut‑away section (depicted in par 34 of the reasons of 18 June). The device is the same size as the picture, or at least approximately so. Under the device are printed the words "three heads ensure no gaps when shaving". Under the picture of the shaving head there is the explanation "advanced dual track shaving system". The device and the picture appear below a description of several claimed characteristics of the "three independently floating heads with 60 precision, self sharpening blades", the first of which is: "• Ensure no hair is left uncut by gaps between the shaving heads regardless of shaving direction." 6 The advertisement is described, in part, in par 37 of the reasons of 18 June. To the right of the paragraph there quoted appear, in black and white, the picture of the cut away head and, beneath it, the device, in black and white. In the top left corner of the picture is the letter "A" and, in the top left hand corner of the device, the letter "B". The point of the "A" and "B" is explained as follows: "An advanced dual track shaving system with self‑adjusting suspension guarantees the smoothest ride over all facial contours (A). Three independent floating heads and sixty precision sharpened multidirectional blades ensure a quick shave where no whisker is missed (B)." In the brochure, as the copy at par 34 of the reasons of 18 June shows, the device (which is printed in colour) is a great deal smaller than the picture of the shaving head. The words between the picture and device are: "Three independently floating heads with 60 precision, self sharpening blades. • Effective on irregular, uneven surfaces and contours. • Cutting heads aligned to eliminate gaps and ensure no hair is left uncut regardless of shaving direction." That second dot point is aligned with the device, immediately to its left. 7 If the device were used in relation to the Remington product, particularly in its coloured form, without the accompanying explanatory words, it would, I think, be difficult to resist the conclusion that it was used as a trade mark. It is, to use what is perhaps an overworked word, stylised and it is a striking image. By itself it conveys no particularly clear meaning except, no doubt, that it has something to do with a triple‑headed rotary shaver. In my view, however, this is another example of the importance of context (see par 45 of the reasons of 18 June). I think there can be little doubt, in the context of the advertisement, that the device indicates a characteristic of the Remington product and not origin. It is specifically linked with text referring to a characteristic; and there is nothing to distinguish it, in that context, from the similarly linked picture of the cut away head. Although the device is printed in colour on the packaging of the Remington product, I think the conclusion must equally be that it is not used as a trade mark there. The message is quite explicit, "three heads ensure no gaps when shaving" - in whatever direction one moves the shaver, no hair will escape attention. I have mentioned that it is next to a picture of the cut‑away head. There are also, on the back of the packaging, four other pictures of the Remington product showing others of its characteristics. Certainly the device is the only coloured picture and, unlike the others, it is not simply a photograph of the machine, or part of it, showing a particular aspect. But I do not think, in context, that those differences sufficiently distinguish the device as indicating what the other pictures plainly do not indicate, trade origin. 8 The use of the device in the brochure might be thought closer to the line, because it is very much smaller than the photograph of the cut‑away head and the other photographs on the brochure and, possibly, because of the way in which it stands out, in vivid colours, against a dark background. But, again, it is explained by the text placed next to it: "cutting heads aligned to eliminate gaps and ensure no hair is left uncut regardless of shaving direction"; the most striking of the three uses is counterbalanced, perhaps, by the most explicit of the three legends. Again, I think that the use of the device on the brochure, looked at on its own or in the context of the other two uses complained of, is descriptive of a characteristic or function of the shaver and not - even partly - a badge of origin. It may be that the widespread and prominent use of such a device, in an aggressive marketing campaign, could in some circumstances amount to trade mark use even if the device were accompanied by words describing a characteristic or function. But that is not this case. In my view, though this may be a borderline case, the uses of which Philips complains are not, individually or considered together, such as to suggest to the reader, "when you see this device you see a Remington". 9 It follows from that conclusion that Philips has not made out any aspect of its case on trade mark infringement. Given my conclusions on its other causes of action, the application, as well as the cross‑claim, must be dismissed.

Costs 10 At the conclusion of the reasons of 18 June, I expressed the view that costs should follow the event in relation both to the application and to the cross‑claim. That outcome requires qualification at least in relation to the costs of the cross‑claim; and Philips submits that it is not an appropriate outcome in relation to the application. 11 Remington had included in its cross‑claim a claim based on an allegation of infringement of s 46 of the Trade Practices Act 1974 (Cth): that Philips had substantial market power in Australia in relation to rotary shavers and had taken advantage of that power for the purpose of preventing Remington from entering the rotary shaver market in Australia or preventing it from engaging in competitive conduct in the rotary shaver market, or in the electric shaver market, in Australia. On the morning of the third day of the trial senior counsel for Remington announced that he would seek leave to amend the cross‑claim to delete that claim, on the agreed basis that each party would pay its own costs of it. That agreement, accordingly, should be reflected in the final orders. 12 Secondly, it is not in dispute that, otherwise, costs of the cross‑claim should follow the event. There is substantial controversy, however, as to the proper order for costs in relation to Philips' various claims against Remington. Remington says that costs should follow the event. Philips submits that the varied success of the parties on the issues or questions between them should, in the circumstances, result in an order the effect of which would be that each party would bear its own costs. 13 Philips failed on each of the causes of action on which its claims for relief were based: trade mark infringement, infringement of its registered design, infringement of the Trade Practices Act and passing off. Broadly, the causes of action to which most attention was given were trade mark and design infringement. They occupied the bulk of the time, and the other two causes of action relatively little time, at the hearing. 14 Philips, in written submissions, placed some reliance on the circumstance that the only trade mark issue on which they failed was trade mark use. That was not a matter, however, on which senior counsel for Philips relied in oral argument, and in my view Remington is, in principle, entitled to an order that Philips pay all its costs of the application relating to the claims that it had infringed Philips' trade marks. The issues on which Remington failed involved difficult and novel questions of construction of the 1995 Act. In my view there is no justification for, in effect, penalising Remington for contesting those questions. 15 Principally, Philips relied on two matters, one of considerably greater complexity than the other. The simpler matter was that Philips had sought relief originally not only in relation to the Remington product (the DT 55) but also in relation to the DT 45 and the DT 50. The interlocutory injunction obtained by Philips extended to all three models. The claims in relation to the DT 45 and the DT 50 disappeared from the picture after Remington, on 24 November 1998, undertook to the Court: "… that it will not, whether by itself, its employees or agents or howsoever otherwise, import for sale, keep for sale, advertise for sale, promote, market or sell the rotary electric shavers known as model numbers RR (DT) 45 and RR (DT) 50 … ." Accordingly, Philips submits that to the extent that the orders for costs cover the interlocutory proceeding they should recognise that that undertaking was given. 16 The more complex of the two matters relates to the elements of the claim of design infringement. Philips claimed that Remington, by distributing the Remington product in Australia and by importing it into Australia for sale or for use for the purposes of trade or business infringed its registered design. Philips' claim was that the Remington product embodied a design which was both an obvious imitation and fraudulent imitation of its registered design. Its claim failed, because I held that the design of the Remington product was not an imitation of the registered design, either obvious or fraudulent. I found, however, that the DT 45 was knowingly, consciously or deliberately based on or derived from the Philips design; I found also that the ultimate design of the DT 55 resulted from a conscious decision to assimilate it, as far as possible, to the Remington range which included the DT 45. Accordingly, I held, the design of the DT 55 should be treated as based on or derived from the same design as the DT 45. In coming to that conclusion I rejected certain evidence called by Remington, particularly evidence of a designer commissioned by the manufacturer of the DT 45 and the DT 55, Izumi, and of certain Izumi officers. Philips' submission is, in essence, that it should not be required to pay any of Remington's costs referable to so much of the case as concerned the derivation of the design of the Remington product, on the footing that the evidence supporting the proposition that the design of the Remington product was not consciously derived from the Philips design was found to be untrue. Indeed, it was submitted that there should be an apportionment of costs on the basis that Remington should pay Philips its costs of that issue. Given the time devoted to that issue at the hearing, and the amount of the pre‑trial work directed to it, the result of the apportionment should be that each party should be, it was said, left to pay its own costs. 17 "There is no difficulty in stating the principles; their application to the facts of a particular case is not always easy": Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40‑748 at 48,136 (Toohey J). The Court has a broad discretion: Federal Court of Australia Act 1976 (Cth) s 43(1). The discretion is, of course, to be exercised judicially. Ordinarily, in the absence of special circumstances, the appropriate order is that the unsuccessful party pay the costs of the successful party. Special circumstances may warrant disallowance of certain of the costs incurred by the successful party (O 62 r 36(1) of the Federal Court Rules deals with particular circumstances of that kind). Where an applicant pursues one substantial aim through a number of causes of action and achieves the substantial aim but fails as to a number of the particular causes of action, some apportionment of costs may be justified where those causes of action accounted for a substantial proportion of the hearing time (Hughes). Where a successful party's conduct of the case unreasonably prolongs proceedings or where that party unreasonably persists in an allegation, or in maintaining a denial, for which there is no foundation, again some apportionment may be appropriate and it may be a proper exercise of the discretion to make the apportionment so as not merely to deprive the successful party of the appropriate proportion of its costs but notionally to require it to pay a portion of the costs of the unsuccessful party (Cummings v Lewis (1993) 41 FCR 559 at 599‑604 (per Cooper J, with whom Sheppard and Neaves JJ agreed). There is no difficulty in finding authority for the proposition that only special circumstances (or the most exceptional circumstances) justify an apportionment (Inn Leisure Industries Pty Ltd v D F McCloy Pty Ltd (1991) 28 FCR 172 at 174 per French J and the authorities which his Honour cites). In Patent Gesellschaft AG v Saudi Livestock Transport and Trading Company (1996) 33 IPR 461 at 463, 464 Olney J summarised the effect of the authorities as follows: "The general thrust of these authorities and of a number of other single judge decisions to which reference was also made is that in the absence of special circumstances costs follow the event but the costs order should reflect the degree of success obtained and a successful party may be ordered to pay some costs in respect of unsuccessful aspects of the case …; the community's interest in economy and efficiency in litigation may be reflected in a qualification of the presumption that a successful party is entitled to its costs …; the costs order in a patent case should where appropriate reflect the extent to which significant sums of costs have been thrown away by reason of one party, albeit successful overall, raising and pursuing unsuccessful points …; where a successful party raises issues or allegations improperly or unreasonably the court may not only deprive him of his costs but might order him to pay the whole or part of the unsuccessful party's costs … . However, a successful party who neither improperly nor unreasonably raised issues or made allegations on which he failed would not be ordered to pay any part of the unsuccessful party's costs … ." It is perhaps not entirely unfair to observe that the definite concluding sentence may not sit entirely easily with all that precedes it and that that circumstance demonstrates the difficulty, and no doubt the inappropriateness, of attempting to state rules or even firm guidelines for the exercise of the discretion. Certainly, Patent Gesellschaft itself, in which Olney J ultimately ordered that each party pay its own costs, appears to have been a case in which particular grounds of invalidity were persisted in where, on his Honour's findings, it should have been apparent that they were doomed to fail. On the other hand, Inn Leisure, in which French J made an apportionment resulting in an order that a respondent pay three quarters of the applicant's costs, does not seem to have been by any means an extreme case. His Honour described it, at 174, as follows: "In my opinion, in this particular case which occupied at trial, although listed for some five days, only half a day of evidence and half a day of argument, there was a common substratum of fact applicable both to the misleading and deceptive conduct claim and to the claim of mistake at law. There were certain elements of the factual matters to which I have already referred which were canvassed at the hearing and were distinct and severable from those issues on which the applicant succeeded. I am of the view that in this particular case, it is appropriate to recognise that fact. I propose therefore to make a minor apportionment of the costs recoverable by the applicant from the first respondent." 18 Philips pleaded fraudulent imitation, and obvious imitation, in general terms. Paragraph 9 of its amended statement of claim reads: "The RR(DT) 55 shaver is an article to which: (i) Australian registered design no. 105780; or (ii) further or alternatively, a fraudulent imitation of that design; or (iii) further or alternatively, an obvious imitation of that design has been applied." That allegation was met, in Remington's second further amended defence, by a simple denial. Although the claim that Remington had applied an obvious imitation of the Philips design was not abandoned, it was not strongly pressed and very little time was devoted to it. The substantial issue was fraudulent imitation. In order to establish that, Philips had to show that the Remington design was consciously based on or derived from the Philips design and that the differences between the two were sufficiently insignificant to characterise the Remington design, within the tests to be found in the authorities, as an imitation. That, it might have been thought (the authorities are referred to in the reasons of 18 June), could have involved an inquiry not merely into the extent and nature of the differences but also into their purpose: whether they were incorporated in order to disguise copying. Those matters are significant because the nature of the allegation made documents concerning the design process clearly discoverable and also because Remington might reasonably have thought it appropriate to lead evidence from those who were involved in the design process. I think senior counsel for Remington was right when he submitted that that would have been so whether or not, at some stage, it was conceded that the Remington design was consciously based on the Philips design, because that evidence might have explained - in fact it did - the reasons for some of the significant differences between the two designs. 19 Philips' complaint is that Remington caused unnecessary prolongation of the case and the incurring of unnecessary expenditure in the course of discovery by maintaining, unreasonably, it was said, its denial that the Remington design was consciously based on the Philips design. Remington points out that Philips did not serve a notice to admit the facts concerning derivation, and that is a matter to which some weight should be given: limited weight however, if only because Philips could not have been in a position to make an informed judgment until the relevant documents had been discovered. It is relevant also, I think, that I did not reject evidence given by Remington's own employees. The difficulties lay in evidence given by Messrs Izumi, Asawa and Sato as to the origin of the design on which, in due course, the DT 45 and, later, the DT 55 was based. The original design made by Mr Sato was, after all, not made for Remington. The evidence makes it clear that there was a close relationship between Remington and Izumi. But I do not think I would be justified in holding that it was unreasonable for Remington to deny conscious derivation on the strength of the evidence which it obtained from Messrs Izumi, Asawa and Sato. Particularly, I do not think I would be justified in finding that the fissures which opened up in cross‑examination, and particularly the inconsistencies with other evidence and the difficulty in giving satisfactory explanations of documents created during the design process, should have been obvious to Remington before the trial commenced - let alone at any earlier period. Certainly Remington's final submissions recognised the difficulty with the evidence and, while the denial of conscious derivation was not abandoned it was not in the end strongly pressed. 20 To say that, however, is not fully to answer Philips' submissions. Philips submitted that in any event conscious derivation was a discrete question to which a good deal of time and expenditure was devoted and on which Remington failed, and failed because crucial evidence was not accepted. Senior counsel for Philips put the point vigorously by contending that it would be unjust to require Philips to pay costs attributable to an attempt to mislead the Court. There is, in my view, undeniable force in that submission. It must also be borne in mind that, while the evidence as to the basis of Remington's decision to adopt the design proposed by Izumi was by no means informative, it did establish that Remington knew about Philips' registered designs and was well aware of the similarities between the DT 45 and Philips' shavers based on their registered design (or its United States counterpart). The considerations relevant to the exercise of the Court's discretion are not exhausted once it is found that a party was or was not unreasonable in making, or maintaining, an allegation or denial. Here, critical evidence underpinning the denial of conscious derivation has been found to have been untrue. There is, I think, an apparent injustice in an order that would simply require Philips to pay Remington's costs of that aspect of the case. 21 It is not novel, but it is true, to say that precise estimation is impossible. Clearly, however, the appropriate course is to make an overall apportionment rather than particular orders as to the costs of individual questions. In making an apportionment I take account of the matters which I have discussed. I think it is appropriate also to take into account both that it has been evident since the interlocutory hearing ((1998) 39 IPR 283 at 300) that there were difficulties with the case on design infringement, so far as it related to the DT 55. Additionally I take into account - though given that it happened very shortly before the hearing I do not give it much weight - the circumstance that at a pre‑trial hearing on 29 September 1998 there was before the Court an affidavit of the managing director of Remington Australia to the effect that Remington intended no longer to import the DT 55 and senior counsel for Remington suggested that the case proceed on the trade mark issues only, on the basis that Remington would give an undertaking in relation to the DT 55 and that there would be no order as to the costs attributable to the case on design infringement (Philips declined to take up that suggestion). In all the circumstances, I think that the amount of the costs to be paid by Philips to Remington should be discounted by a moderate amount on account both of the conscious derivation question and the undertaking, following the interlocutory hearing, in relation to the DT 45 and DT 50. Philips should be required to pay three quarters of Remington's costs of the proceeding, other than those attributable to the cross‑claim. Accordingly, the orders of the Court are that:

1. The application be dismissed.
2. The cross‑claim be dismissed. 3. There be no order as to the costs of the cross‑claim to the extent that those costs are attributable to the claim based on alleged infringement of s 46 of the Trade Practices Act 1974 (Cth). 4. Otherwise, the cross‑claimant pay the cross‑respondents' costs of the cross‑claim, including reserved costs. 5. Except as provided in orders 3 and 4, the applicants pay three quarters of the respondent's costs of the proceeding, including reserved costs. I certify that the preceding twenty‑ one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane.

Counsel for the Applicant: Mr A J L Bannon SC with Mr D B Studdy

Solicitor for the Applicant: Allen Allen & Hemsley

Counsel for the Respondent: Mr D Shavin QC with Ms E A Strong

Solicitor for the Respondent: Freehill Hollingdale & Page