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[1993] FCA 325
General information, not legal advice.
Federal Court of Australia
1993-07-09
Lockhart J
Original judgment source is linked above.
LEVI STRAUSS AND CO and LEVI STRAUSS (AUSTRALIA) PTY LIMITED v WINGATE
[1993] FCA 325; (1993) AIPC 91-016 (extract)
Trade Marks - trade practices - passing off - sale of second hand goods bearing well known registered trade marks without licence - whether mark "REVISE" deceptively similar to "LEVI'S" - importance of manner of sale of product - whether sale of second hand altered and unaltered goods infringes registered trade marks - failure to comply with care labelling requirements.
2. Levi Strauss bring in short minutes of order to give effect to
the Court's reasons for judgment.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
LOCKHART J This case raises questions in the law of trade marks, passing off and trade practices relating to the sale of second hand goods bearing well known registered trade marks of which the seller is not the registered proprietor or its licensee.
2. The first applicant, Levi Strauss and Co, is a United States corporation which by itself, subsidiaries and licensees has for many years carried on the business in the United States and many other countries including Australia, of making and supplying jeans and other apparel, using in connection therewith trade marks of which it or other related companies are the registered proprietors.
3. The second applicant, Levi Strauss Australia Pty Limited, is the exclusive licensee of the first applicant, to manufacture and supply jeans and other apparel in Australia to the designs and specifications of the first applicant and bearing the trade marks of the first applicant and its related companies. The second applicant has for many years carried on the business in Australia of making, importing and supplying such jeans and other apparel.
4. For convenience I shall refer to the applicants and each of them as "Levi Strauss" and to jeans manufactured by Levi Strauss as "LEVI'S" jeans.
5. The first respondent, Wingate Marketing Pty Limited ("Wingate"), is incorporated in Victoria and it carries on the business of importing from America, but not from Levi Strauss, second hand denim garments including jeans, most of which are "LEVI'S" jeans.
6. The second respondent, Eileen Woolley ("Mrs Woolley"), is a shareholder and the managing director of Wingate and is its driving force.
7. In 1990 Mrs Woolley set up the business owned by Wingate of importing second hand garments from the United States. The second hand clothing is sorted and treated in Australia by or on behalf of Wingate, laundered and subjected to various forms of alteration or treatment including patching, restitching and overdyeing before being sold to the public. When restored it is sold under the name of "REVISE". The Wingate products are sold in various retail outlets including large department stores and fashion shops. The products with which this case is concerned are "LEVI'S" jeans which bear a number of trade marks of Levi Strauss.
8. Wingate, in the course of carrying on its business, is supplying retailers with second hand "LEVI'S" jeans, bearing one or more of the Levi Strauss trade marks, the jeans having been altered in various degrees and the label "REVISE" affixed to them. It is alleged by Levi Strauss that Wingate has infringed the Levi Strauss trade marks, passed off the goods as goods produced by Levi Strauss and engaged in misleading or deceptive conduct pursuant to s. 52 of the Trade Practices Act (also s. 53(a), (c) and (d)).
9. Levi Strauss alleges that Mrs Woolley is knowingly concerned is what is alleged to be the wrongful conduct of Wingate in contravention of the Trade Practices Act. Levi Strauss seeks injunctive relief, damages or an account of profits.
10. Most of the facts are not in dispute, but there is dispute about some of them; and questions of credit and reliability of witnesses are involved to some degree.
11. Since 1856 Levi Strauss and its predecessors in business have carried on business as designers, manufacturers and marketers of clothing, particularly denim jeans. Levi Strauss was founded by Mr Levi Strauss who was born in Bavaria in 1829 and migrated to the United States in 1847. From small beginnings, Mr Strauss's firm subsequently grew into the present Levi Strauss empire. It has become a world wide manufacturer and seller of clothing, particularly of denim jeans. Levi Strauss currently employs approximately 32,000 people in over 100 facilities in various countries including the United States, Canada, Europe, Japan, Latin America and Australia. Its world wide sales of denim jeans in 1991 amounted to 270.4 million units (with 72.9 million units sold outside the United States) at a sales value to Levi Strauss of $US4.9 billion (with $US1.9 billion sales value being outside the United States including $US385.4 million sales value in the Asian-Pacific region including Australia).
12. Levi Strauss has sold jeans in Australia marked with its trade marks since about the early 1960s. "LEVI'S" jeans have been manufactured in Australia since 1973.
13. For many years Levi Strauss has had a comprehensive world wide system of trade mark registrations. Since 1856 Levi Strauss has designed, manufactured and marketed clothing, in particular trousers or jeans, under the name "Levi Strauss and Co". Levi Strauss has also used the names "LEVI'S" and "Levi Strauss" in relation to its business and on its products, particularly with respect to the advertising and promotion of "LEVI'S" jeans. The trade mark "LEVI'S" was first registered by Levi Strauss as a trade mark in the United States in 1928. "Levi Strauss and Co" is also registered as a trade mark by Levi Strauss.
14. From about 1873 until the Second World War, "LEVI'S" jeans featured a distinctive arcuate stitching pattern on the back pockets. The arcuate was first registered by Levi Strauss as a trade mark in the United States in 1943 and is thought to be the oldest apparel trade mark in the United States which remains in use. During the Second World War, in order to conserve materials, the arcuate stitching pattern was omitted from the back pockets of "LEVI'S" jeans and the arcuate was painted on the back pockets of most "LEVI'S" jeans. From about 1947 Levi Strauss resumed stitching the arcuate stitching pattern on the back pockets of "LEVI'S" jeans and that practice has continued to the present.
15. Since about 1886 "LEVI'S" jeans have featured a leather patch on the rear waste band incorporating a trade mark known as the "Two Horse" mark showing two horses struggling (apparently unsuccessfully) to pull apart a pair of "LEVI'S" jeans. This mark was first registered by Levi Strauss in the United States in 1910. The words "Two Horse" were registered in 1917.
16. In about 1890 Levi Strauss began to assign design or lot numbers to its products. "LEVI'S" jeans, then known as denim waste overalls, were assigned the design or lot number "501". Since 1890 Levi Strauss has continued to use the design or lot number 501; and that particular design of denim jeans has become recognized and known as "501" jeans. The trade mark "501" was first registered in the United States at that time.
17. Since about 1936 many pairs of "LEVI'S" jeans have featured a distinctive tab (often red) (the "red tab") sewn on the left hand seam of the back right hand pocket, often with the word "LEVI'S" incorporated. The tab was first registered as a trade mark by Levi Strauss in 1938.
18. Since about 1930 "LEVI'S" jeans have been sold with a removable card "Quality Guarantee Label" attached. The Quality Guarantee Label was first registered by Levi Strauss as a trade mark in the United States in 1927.
19. Since December 1937 "LEVI'S" jeans have been sold with a button design. The button design was first registered as a trade mark in the United States by Levi Strauss in 1972.
20. All of these trade marks have been registered in respect of clothing.
21. The trade marks to which I have referred are some of Levi Strauss's trade marks. They are all registered as trade marks in Australia by Levi Strauss. Levi Strauss Australia is in each case a registered user of the trade mark.
22. The trade marks registered in Australia and relevant to this proceeding take the following form:
Registration No. A192,104 (the "Two Horse" mark).
Registration No. B220,174 containing the word "Levis" in vertical
form. This mark is registered in Part B of the Register.
Registration No. A251,717 registering the name "LEVI'S".
LEVI'S
Registration No. A299,544 in the following form.
Registration No. A299,545. This is the same mark as for
registration A299,544, but is in a different class, namely, buttons.
Registration No. B302,847 showing the arcuate stitching pattern on
the back pockets in the following form:
Registration No. B304,665
Registration No. A324,592
Registration No. A328,729
Registration No. B442,533 for the figures "501".
501
23. All of the Australian registrations are in respect of clothing included in class 25 except No. A299,545 which is in respect of buttons included in class 26. Registration No. B302,847 (the arcuate) is registered in Part B of the register in respect of pants being goods included in class 25. Registration B304,665 is also for goods included in class 25 and B442,533 in Part B of the register is in respect of goods included in class 25.
24. Levi Strauss has for many years manufactured and sold clothing in a variety of styles, aimed predominantly at a market consisting of people aged between about 10 and 40. In Australia the products sold by Levi Strauss include jeans, shirts, jackets and accessories. Levi Strauss is best known for and cultivates its connection with the sale of jeans to young people.
25. The "LEVI'S" 501 style of jeans is at the premium end of the market. Over 10% of the units sold by Levi Strauss Australia in 1991 were pairs of "LEVI'S" 501 jeans. It is the style which has become and remains the most fashionable style of "LEVI'S" jeans amongst young people; and its pricing and sales match its premier position in the Levi Strauss product range. "LEVI'S" jeans which incorporate the red tab are at the premium end of the product line.
26. In about February 1991 Levi Strauss began to sell in Australia blue indigo "LEVI'S" 501 jeans with a "second hand" look and in or about April 1991 introduced black "LEVI'S" 501 jeans with a "second hand" look. "LEVI'S" jeans with a second hand look are sold in Australia with a special label which points out that the garment has undergone a special process in order that a second hand look may be produced. There is a warning on the label that the garment is not guaranteed to wear as long or as durably as regular "LEVI'S" garments. Additionally, the Levi Strauss "Quality Guarantee Label" is not attached to the second hand look jeans. "LEVI'S" 501 jeans, at the top of the product range, are sold with a second hand look. "LEVI'S" second hand look 501 jeans are sold at a premium price and are typically purchased by the more fashion conscious of consumers. They give what customers perceive to be the advantage of being able to wear "LEVI'S" 501 jeans which look worn (and therefore apparently look fashionable) without having to be worn in.
27. Over 28 million units of "LEVI'S" products have been sold in Australia in the eleven years from 1981 to 1991. Each of the units sold incorporates one or more of the Levi Strauss trade marks. In the case of "LEVI'S" 501 jeans and "LEVI'S" second hand look 501 jeans, each unit of product sold incorporates each of the Levi Strauss trade marks to which I referred earlier and which are pictorially represented earlier with the exception in the case of the "LEVI'S" second hand look 501 jeans of the Quality Guarantee Label.
28. Levi Strauss Australia has approximately 1,400 customers (retailers) who sell Levi Strauss's products at approximately 2,300 retail sales outlets. All of the products sold by Levi Strauss world wide and in Australia are new, although certain styles of "LEVI'S" jeans are carefully processed so as to appear to be worn. In fact no used or second hand products are sold by Levi Strauss or Levi Strauss Australia.
29. Levi Strauss has for many years extensively advertised and promoted its products by using its trade marks, throughout the world including Australia. It is unnecessary to state the details of the methods and volume of advertising engaged in by Levi Strauss. The advertising is extensive, using all the print and electronic media. Its advertising budget in Australia is very large. It is not disputed that Levi Strauss has a large and valuable world wide reputation, including in Australia. "LEVI'S" jeans are a household word in many countries, including Australia.
30. Approximately 95% of "LEVI'S" jeans for the Australian market are manufactured in Levi Strauss Australia's own plant located in South Australia. The remainder is manufactured by independent contractors in Australia and by Levi Strauss's plants and independent contractors in other countries. Levi Strauss takes extensive and elaborate measures to ensure that its garments are of the highest quality; the details are not important for present purposes.
31. Finishes in denim garments vary widely in the complexity of the look created and the process necessary to create that look. The finishes range from a simple rinse-wash of a pair of jeans to produce a washed look, through to stonewashing (i.e. washing with pumice stones) in order to produce a more used look, to heavy bleaching to produce a much lighter and worn finish. The more complicated finishes require all three processes: rinse-washing, stonewashing and bleaching.
32. The second hand look of certain 501 jeans is created by washing the garments in particular chemicals or with special stones. In general the finishing process will include an initial wash of the garments with detergent, softener and enzymes to remove the starches; drying; a second wash with stones or bleach; a third rinse-wash with bleach and detergent to remove dirt and residue from the stones; and a final drying. Due to fashion changes the finishing of jeans has become a very complex process. The number of different types of washes or finishes for "LEVI'S" jeans in Australia varies each season. The increase in the complexity of the processes of production has been matched by increasing control over the finishing of the product by Levi Strauss which has developed a comprehensive and systematic approach to quality control in order to ensure compliance with Levi Strauss' standards. The process of finishing jeans by washing them with stones and harsh chemicals is intentionally wearing on the fabric from which the jeans are made. Due to the inherently wearing nature of the process, some damage inevitably results. One of the more popular finishes today, heavy stonewash, is particularly wearing. The number of goods initially rejected from a particular batch of finished goods is typically between 7% and 30%. Screening and repairing reduces this to between 2% and 8%. Strict controls are imposed by Levi Strauss Australia to ensure that the process creates the desired "used look" or special finish without resulting in an excessive amount of unacceptable damage to the jeans.
33. Jeans which do not meet the requisite standards of Levi Strauss are classified as seconds or thirds and so marked. Levi Strauss applies strict standards in defining second or third quality garments and in marking such garments to indicate clearly that they do not meet Levi Strauss's high standards of quality. It is the policy of Levi Strauss that only first quality garments may be sold under the full array of trade marks of Levi Strauss. A second quality pair of jeans (seconds) must have the "LEVI'S" tab removed; and the leather like patch with the "LEVI'S" Two Horse trade mark must be defaced with the word "Irregular" stamped on it in black ink. "Irregular" is stamped inside the jeans on the white pocket lining, and any pocket plasters and hang tags carrying Levi Strauss's trade mark are removed. Second quality jeans are sold by Levi Strauss Australia at reduced prices at seconds outlets.
34. If a garment is considered to be of third quality (thirds), in addition to removing the "LEVI'S" tab, the leather like patch is almost entirely cut off, leaving only the style number and size of the garment. The woven patch which appears inside the garment is removed; and the word "third" is stamped inside the jeans on the white pocket lining. The pocket plasters and hang tags are removed and the trade mark "LEVI'S" is cut off the care label. Third quality jeans are not sold. They are boxed and transported to the cutting room where they are cut up and placed in a waste bin for disposal under supervision.
35. A garment may be classified as a second or a third based on four criteria: colour, measurement, other visually detected defects, and failure to observe laboratory specifications and standards.
36. I turn now to the operations of Wingate. The second respondent, Mrs Woolley, has full responsibility for all the commercial operations of Wingate, having previously held various executive positions in the clothing industry. In 1990 she set up the business owned by Wingate of importing second hand American garments. The idea of commencing the business came to her during a trip to the United States in which she realized that recycled clothing had become fashionable on both the east and west coasts. She thought that the concept of recycled clothing was excellent because of the huge volumes of clothing manufactured each year and the consumption of raw materials during the process of manufacture. At the same time she recognized there were problems of attitude in the community to be overcome if she was to be successful in marketing recycled clothes, as people attach a stigma to the wearing of second hand clothes which in the public mind are associated with charity outlets and "Op shops". She believed that the best way to make the business successful would be to make the presentation of the clothing as attractive as possible.
37. She hoped to market the clothing in retail outlets and believed that the presentation of the product and appropriate labelling and ticketing were necessary. She gave evidence that she and her husband reached the conclusion that they should call the products by a name which indicates that they are recycled products; hence they chose the name "REVISE".
38. I should pause at this point to observe that, in my opinion, the word "REVISE", although susceptible of a variety of meanings, does not normally carry the connotation of recycle or re-use, words which one is accustomed to use when speaking of second hand goods. It is a curious word to use in this context. It generally carries the notion of revision, for example, revision of studies such as homework. The word does, however, according to some of the dictionaries, have a secondary connotation of "modify". In her affidavit, Mrs Woolly said that she reached the conclusion, after discussion with her husband, that they should call the products "by a name indicative of their origin and recycled status. Hence we chose the name 'REVISE'." This evidence was explored when she was in the witness box, and she said that she meant to convey by the words used in her affidavit with respect to the name "REVISE" that "it was a revised use for clothing which had been disposed of and which would otherwise have been perhaps garbage". She denied that she had anything else in mind and said "indicative of their origin means that ... it originated from a disposed of place, either a Salvation Army bin or a place of that nature." She said that by "origin" she meant indicative of the fact that it is a recycled product. She denied that the name was chosen by her because it looked like and sounded like "LEVI'S". I do not accept her evidence on this point. In my opinion Mrs Woolley chose the name "REVISE" because it was a rather clever play on "LEVI'S", if pronounced "Reevise" (with the accent on the first syllable, to rhyme with "LEVI'S"), which the evidence demonstrates is the pronunciation adopted by a significant number of people. In my view she had in mind that consumers might associate "REVISE" with "LEVI'S", whether pronounced "REVISE" or "Reevise" (especially as the same shops would tend to sell both products), and think that "LEVI'S" and "REVISE" had the same badge of origin notwithstanding that "REVISE" jeans are second hand. My view on this matter is based also on Mrs Woolley's evidence about the choice of labels from time to time attached to Wingate's products; to which I shall return. Mr Woolley did not give evidence, though I draw no inferences from that circumstance.
39. Wingate imports fairly large quantities of second hand denim from the United States. The initial emphasis was on the importation of denim, with jeans being the main item in the Wingate range. There is a developed network of rag recycling in the United States and used denim can easily be purchased. Recycled denim has become a world wide business. Wingate also imports other second hand items seasonally, such as suede jackets, wool shirts, lightweight cotton shirts and vests. Wingate markets eight brands of second hand denim in addition to "LEVI'S" jeans. Wingate also manufactures new clothing items under the brand name "American Rag".
40. All recycled products sold by Wingate have been marketed under the name "REVISE" since about November 1990. On 9 November 1990 Wingate applied for the registration of a trade mark containing the word "REVISE".
41. The clothing imported by Wingate is in most cases obviously worn. In the case of denim this appears to add to the attractiveness of the product in the minds of some people. Much of the denim product is worn through, is ripped or contains holes. In some cases this has already been patched by the previous owner or owners. In many cases Wingate patches the product itself in order to make it as attractive as possible. Many of the patches are conspicuous. Some jeans are patched with suede patches, American flags or other colourful patches. In other cases jeans which are stained are dyed to cover the stains. Although it is fashionable and attractive to some if the product is presented as a worn and "lived in" product, it is the normal practice of Wingate to recondition or repair the jeans to ensure that, while preserving their unique appearance, they are saleable and durable denim products.
42. Mrs Woolley gave evidence that Wingate dyes clothing that has previously been stained provided it has no holes; and it converts some jeans into shorts if the legs of the jeans have been completed destroyed. She said that Wingate no longer does work by way of alterations and patching which it previously did. There is now only dyeing and cutting off; alterations are not carried out. Mrs Woolley's evidence was challenged on this question in cross-examination, particularly because the work of Wingate, involving patching and other alterations to the "LEVI'S" jeans, was sworn to by her in her affidavit in the present tense, the relevant affidavit having been sworn on 5 August 1992. Mrs Woolley said under cross-examination that this major alteration work partially ceased roughly between 12 and 18 months ago (she gave oral evidence on 23 March 1993). She later said in cross-examination that she could neither confirm nor deny the accuracy of this evidence. In her affidavit she said that it was her then current practice (August 1992) to patch with suede patches, American flags and other colourful patches. She said in oral evidence that presently jeans are not bleached by Wingate, but they are on occasions stonewashed. The stonewashing is done by a contractor who physically uses stones.
43. I have reservations about the reliability of Mrs Woolley's evidence that Wingate ceased major alteration work roughly 12 to 18 months ago. I am not prepared to accept her evidence on this point. I do not think that she was being untruthful. My impression is that she was unsure about her evidence in this respect. However, I accept that at the present time Wingate confines its work to laundering, stonewashing, dyeing of jeans which are stained, and cutting-off jeans to make shorts, and that it does not patch jeans either by cartoons, suede or other means, and does not colour strip or bleach jeans or paint them.
44. The marketing activities of Wingate came to the attention of Levi Strauss. A substantial body of correspondence then passed between the parties and their solicitors.
45. Various labels have been adopted from time to time by Wingate for its products, commencing in November 1990 with a label in the following form.
46. Mrs Woolley gave evidence about the history of the labels and said, with respect to the first label introduced in November 1990 ("the first label"), that it was "evocative and certainly brought to mind "LEVI'S", but that was not the reason for the choice of the word"; evocative because it shares letters in common with "LEVI'S", the letters being the ones that are in bold or in block and the others are in "shadow".
47. Following initial complaints of Levi Strauss about the first "REVISE" label of Wingate, a second printing of the label was undertaken.
48. After 15 January 1991 this second version of the label ("the second label") was used by Wingate until July 1991.
49. Further complaints were made by Levi Strauss through their solicitors in relation to the second label, in response to which a third label was printed and used on Wingate's product from about 12 July 1991 to 24 September 1991 ("the third label"). The third label appears in the following form.
50. The third label differed from the second label only in that the words "Imported to Australia by Wingate Marketing P/L" were added at the foot of the label in small print and it also made provision for insertion of a grade. The third label was overprinted to include the words "second hand" between the words "Recycled" and "environmentally friendly clothing" and as overprint was used from about 24 September 1991 to 8 January 1992.
51. There were further requests made by Levi Strauss for a variation of the label and a fourth label was produced by Wingate which was used from 8 January 1992 ("the fourth label"). This was identical to the third label save for the addition of the words "second hand" and Wingate's ACN number.
52. A fifth version of the label was printed and used after 2 March 1992 in the following form ("the fifth label"). It is the same as the fourth label except that it introduced the words "and modified".
53. Evidence was given by a number of consumers and people in the clothing business. I do not propose to recite the evidence of each of them; but I shall refer to the evidence that is in my view significant and state my conclusions with respect to all the evidence. I have taken the evidence of all the witnesses into account.
54. Mr Fraser, the managing director of Levi Strauss Australia, first became aware of the sale of second hand "LEVI'S" jeans under the label "REVISE" in about August 1991. On 26 March 1992 he visited the Myer department store in Melbourne. He looked at "LEVI'S" products on display in the women's area on the second floor of the main store, and saw second hand "LEVI'S" jeans with the "REVISE" label on a "four-way bar rack". They were mixed with new "LEVI'S" jeans which did not display any "LEVI'S" card labels; yet Levi Strauss Australia has not sold "LEVI'S" products to Myer without card labels attached. This was not the fault directly of the respondents, but it illustrates the problems of retailers mixing new and second hand goods that look new or fairly new.
55. Katy Batzogianni is a service assistant in the Miss Shop at Myer, Chadstone, Victoria. She saw second hand "LEVI'S" 501 blue jeans with the cardboard "REVISE" label on the back pocket about February 1992 when they came into the Miss Shop. They sold quickly. She gave evidence that experienced customers usually asked for "REVISE" jeans or "second hand" jeans or "REVISE LEVI'S". She thought until 1 October 1992 that "REVISE" jeans were "brought out" by Levi Strauss and that "LEVI'S" was distributing the "REVISE" jeans by getting second hand jeans, washing them, labelling them and reselling them. She said that when the Miss Shop stocks "REVISE" jeans she always puts them on a rack next to the new "LEVI'S" jeans in the shelves. She did not recall seeing any "care labelling" on the "REVISE" jeans. Because the "LEVI'S" tab was still on the "REVISE" jeans when they came into the shop, she assumed they were jeans from Levi Strauss. She realized that the "REVISE" jeans were second hand jeans. She said that customers tended to ask for "REVISE" jeans by pronouncing "REVISE" as "Reevise" (to rhyme with "LEVI'S").
56. Stephanie Marina Bronk is a solicitor employed by the solicitors acting for Levi Strauss. She went to Dotti, a retail clothes shop in the Centrepoint complex, Pitt Street, Sydney where there were hanging together many pairs of second hand "LEVI'S" jeans, above which was a sign saying "REVISE Genuine Recycled American LEVI'S". All but one of the pairs of jeans displayed had either "REVISE" or "X-US" cardboard labels on the back pocket. One pair of jeans had no label attached to the back pocket. The only indication of its source was its original "LEVI'S" trade mark. At the rear of the shop there were four to six pairs of "LEVI'S" jeans with flags and patterned material sewn on to the front legs, each pair of which bore a "REVISE" cardboard label on the rear pocket. At the side of the shop there was a rack of cut-off shorts made from "LEVI'S" jeans bearing "REVISE" cardboard labels. She asked the shop assistant near the circular rack at the front of the shop if the jeans came from "LEVI'S", to which the assistant replied "Yes, they are all "LEVI'S". "LEVI'S" "REVISE". They are all genuine, made in the US, "LEVI'S" jeans." She said "REVISE" so that it rhymed with "LEVI'S". Miss Bronk on the same day went to Sportsgirl in Pitt Street Mall, Sydney. Large numbers of second hand jeans were on display, both blue and black. There was a "REVISE" label attached to the back pocket of each pair of second hand jeans which she saw. She asked the shop assistant if she knew who sold the jeans, to which the reply was "Yes, they're "LEVI'S" and second hand". She said "they buy them second hand and launder them and they are sold again. They're called REVISE."
57. Melinda Lee Butcher was the Customer Services Manager of the Miss Shop at Grace Bros. Chatswood at relevant times with approximately 13 sales assistants under her control. She has seen second hand "LEVI'S" 501 blue jeans with a cardboard label on the back pocket with the word "REVISE" on it for sale in other stores, but not in Grace Bros. Chatswood, which has not sold "REVISE" jeans. "REVISE" jeans are sold in Grace Bros. City Store. She said that recently (i.e. with reference to October 1992) Grace Bros. Chatswood began selling in the Miss Shop second hand "LEVI'S" jeans with a cardboard label attached to the back pocket with the word "X-US" on it. People first started asking for the second hand "LEVI'S" jeans about the first week of December 1991. When she first heard that second hand "LEVI'S" jeans were on the market, though she had not yet seen the label, she thought they were being sold by Levi Strauss. Customers usually asked for "second hand LEVI'S" or "recycled LEVI'S". To the best of her recollection customers did not use the name "REVISE" when enquiring after second hand "LEVI'S" jeans. It was not until she actually spoke to the Levi Strauss representative at the end of 1991 or the beginning of 1992 that she realized the second hand "LEVI'S" were not being sold to Grace Bros. by Levi Strauss. It was about then that all the Grace Bros. stores were made aware that "REVISE" jeans "were not Levi Strauss products". They were told then that "REVISE" second hand jeans were not to be merchandized near "LEVI'S" jeans.
58. Lynda Jacqueline Gardener is a retail services representative employed by Levi Strauss Australia. She first became aware of the "REVISE" label between October 1990 and January 1991. She noticed "REVISE" items for sale in a "few small trendy" jeans stores. She first observed "REVISE" products in Myer stores on 11 April 1991 when visiting the Bargain Basement of the Myer Melbourne store. She noticed a rack of what appeared to be second hand "LEVI'S" jeans in poor condition. The "REVISE" product range available at Myers stores expanded considerably over time. Initially, they were limited to only second hand "LEVI'S" jeans without alteration, but later included second hand "LEVI'S" jeans with leather front panels, American flag front panels, patterned fabric front panels, dyes of different colours, hand-painted flowers, or cut-off to make shorts. She said that the "REVISE" product is extremely popular and "REVISE" appeared to be continually increasing its market share in the Myer stores (her affidavit was sworn in April 1992). At that time at least twelve Myer stores sold "REVISE" products. She said that "REVISE" products were often found in Myer stores in places where they were mixed with new "LEVI'S" jeans and on racks topped with "LEVI'S" signs and on shelves or racks adjacent or close to racks or shelves carrying Levi Strauss's products. In July 1991 she purchased from a store called Dangarfield in Collins Street, Melbourne one pair of blue "LEVI'S" denim jeans on which a flag of the United States was sewn on the front of the legs. The card stapled to the back right hand pocket of the jeans had the words "REVISE". Made in USA. Recycled. Environmentally friendly clothing. Size 33". A Dangarfield's card was attached to the front of the jeans. The purchase price was $150. She purchased other pairs of jeans from other stores in Victoria which had the "REVISE" card on them. On 28 May 1992 Miss Gardener visited the Miss Shop in the Myer store at Northland Shopping Centre, Preston, East Victoria and spoke to an assistant there who asked Miss Gardener "Can I get more "REVISE" and "X-US" from you?"; to which Ms Gardener said no, she could not because "REVISE" and "X-US" "are not Levi's products".
59. Other evidence of this kind was given by Mr Michael Roland Hall, a solicitor employed by the solicitors acting for Levi Strauss; Ms Margaret Harrison, a retail services representative employed by Levi Strauss Australia; Ms Lisa Gai Martin, a paralegal employed by the solicitors acting for Levi Strauss; Ms Monica Murphy, a sales representative employed by Levi Strauss Australia; Ms Marina Bozica Ritissa, a solicitor employed by the solicitors acting for Levi Strauss; Ms Annie Sargood, the customer services manager of the Miss Shop at Myer Chadstone, Victoria; and Ms Joanne Sciberras, a sales assistant employed by Myer Stores Limited who has been working at the Grace Bros. City Store in Sydney for some two years or more.
60. Most of the witnesses were cross-examined. Conclusions which I draw from their evidence may be briefly stated. Sales staff in retail stores including Myer, Grace Bros., Dotti of Centrepoint, Sportsgirl in the Pitt Street Mall, Sydney, have been and are confused as to whether Levi Strauss is in some way involved in the recycling and resale of second hand "LEVI'S" jeans under the name "REVISE". They are confused as to whether Levi Strauss is the source of "REVISE" jeans.
61. Also, statements were made to customers in some of these retail stores by shop assistants that are likely to confuse customers as to the source of "REVISE" jeans; in that customers are confused as to whether or not Levi Strauss is in some way involved in the sale of "REVISE" jeans. I am satisfied that a substantial body of the purchasers of jeans from retail stores and a material number of sales staff employed at retail stores hold the view that Levi Strauss engages in the business of recycling and re-selling its jeans as second hand jeans.
62. Most of the shops which sell "REVISE" jeans are shops which (not including the "REVISE" products) sell new, not second hand goods; but some of them sell new and second hand goods (eg. Dotti of Centrepoint).
63. The retail prices of "REVISE" jeans are broadly similar to the prices of new "LEVI'S", though generally "REVISE" jeans are cheaper, but some are dearer.
64. In the case of some retail shops (including Dotti) Wingate does not supply them direct; they obtain "REVISE" jeans from other suppliers who in turn purchase them from Wingate.
65. I turn to the first question whether the mark "REVISE" is deceptively similar to relevant trade marks of Levi Strauss, in particular the mark "LEVI'S". Of the various trade marks that have been registered by Levi Strauss in Australia only two are relevant to this question, primarily the trade mark registered number A251,717 which is registration of the mark "LEVI'S". The other relevant mark is number B220,174 which depicts the word "LEVI'S" in a vertical position. This is a registration in Part B of the register. Both marks are registered in respect of goods included in class 25 and so they include jeans but extend beyond jeans to various articles of apparel.
66. A trade mark indicates a connection in the course of trade between the goods and the registered proprietor or registered user (s. 6(1)).
67. The proprietor of a mark registered in Parts A or B of the Register of Trade Marks has the right to the exclusive use of that mark in relation to the goods or services with respect to which it is registered and the right to obtain relief against infringement: s. 58(1) of the Trade Marks Act 1955 ("the Trade Marks Act"). The rights are subject to any conditions or limitations to which the registration is subject (s. 58(2)). A trade mark is infringed when a person, not being the registered proprietor or registered user of the mark, uses a mark which is substantially identical or deceptively similar to the registered trade mark, in the course of trade in relation to the relevant goods or services (s. 62(1)). A registered mark is therefore infringed by use of the exact mark (s. 58) or use that is substantially identical with or deceptively similar to the trade mark (s. 62(1)).
68. Section 6(3) of the Act deems a trade mark to be deceptively similar to another trade mark where the resemblance is likely to deceive or cause confusion.
69. The question is whether the use by Wingate of the mark "REVISE" so closely or clearly resembles "LEVI'S" as to be likely to deceive or cause confusion. The test of deceptive similarity is to have regard to the impression that will be produced in the minds of consumers: The Shell Company of Australia Limited v Esso Standard Oil (Australia) Limited [1963] HCA 66; (1964) 109 CLR 407 at 415-6; Australian Woollen Mills Limited v F S Walton and Co Limited [1937] HCA 51; (1937) 58 CLR 641 at 658. The applicant must discharge the onus of establishing deceptive similarity or likelihood of confusion. The test is not whether consumers might think that "REVISE" is essentially the same as "LEVI'S". It is sufficient that there is a real risk that the result of the use by Wingate of its mark "REVISE" will be that a significant number of persons will be caused to wonder as to the source of the goods. There must be confusion as to the origin of the goods. People must be caused to wonder as to whether or not the seller of the second hand goods sold under the mark "REVISE" is associated with "LEVI'S": Colgate Palmolive Limited v K F Pattron (1978) RPC 635; Southern Cross Refrigerating Co v Toowoomba Foundry Pty Limited (1954) 91 CLR 592.
70. Whether there is a likelihood of confusion is ultimately a question for the Court to determine; but it may have regard to the evidence of witnesses called at the hearing: Murray Goulburn Co-Operative v NSW Dairy Corporation [1990] FCA 32; (1990) 24 FCR 370 at 377; Ritz Hotel Limited v Charles of the Ritz Limited (1988) 15 NSWLR 158 at 215.
71. Levi Strauss does not complain of the use by Wingate of the first label. Only 300 items were sold under that first version and that matter was settled between the parties. Levi Strauss does rely upon the other four labels used by Wingate to which reference has already been made, commencing with the use of the second label in July 1991 and culminating in the fifth label which has been used since March 1992.
72. It is not merely a question of comparing the word "LEVI'S" as registered as a trade mark and the word "REVISE". The test is to compare the registered trade mark of Levi Strauss and the actual use by Wingate of its mark "REVISE" in the course of its business: Australian Woollen Mills Ltd v F S Walton and Co Ltd [1937] HCA 51; (1937) 58 CLR 641 at 658; Clark v Sharp (1898) 15 RPC 144 at 146; Cooper Engineering Co Pty Limited v Sigmund Pumps Ltd [1952] HCA 15; (1952) 86 CLR 536 at 538.
73. It is important to commence with an ocular examination of the registered marks of Levi Strauss and the labels of Wingate other than the first label. The word "REVISE" in the second label does suggest to me "LEVI'S" when the two words are used in conjunction with each other. There is I think a tenuous connection between revision and recycling and I do not regard the former as a synonym for the latter. The words on the "REVISE" label "Made in USA" necessarily connote a reference to the first applicant Levi Strauss. The words "recycled", "environmentally friendly clothing" and the logo are neutral matters. The third label includes the word "REVISE" exactly as in the second label. The difference is that the words "Imported to Australia by Wingate Marketing P/L" appear on the third, not the second, label. These words are neutral for trade mark comparison purposes. There is no essential difference between this label and the previous label.
74. The third label was later overprinted to include the words "second hand" between the words "recycled" and "environmentally friendly clothing". Again no material difference has occurred. The addition of the words "second hand" is neutral to the question of origin.
75. The fourth label simply included the reference to Wingate's ACN number: this is irrelevant. The fifth label is the same as the fourth label except that the words "and modified" have been added which in my opinion does not introduce any relevant change.
76. A critical factor is that "LEVI'S" jeans and "REVISE" jeans are both sold in shops most of which sell only new goods.
77. The manner of sale of the jeans is important. "REVISE" jeans are sold alongside and amongst new "LEVI'S" jeans. The prices between the two jeans are roughly comparable. The nature of the goods is important because in recent years a large segment of the market for "LEVI'S" jeans consists of people who like the look of second hand jeans, but want them to be new. Elaborate and careful measures are adopted by Levi Strauss to ensure that certain of their jeans have the second hand look, albeit they are in fact new jeans. The "REVISE" jeans being second hand certainly have the second hand look. It is an unusual circumstance and one that is of importance.
78. Another important factor is that "REVISE" labels are placed upon "LEVI'S" jeans which themselves bear the Levi Strauss trade marks so that consumers see the "REVISE" label alongside the Levi Strauss marks. It is fundamental to the marketing policy of Wingate that the consumers buy Levi's jeans which originate from Levi Strauss bearing its trade marks.
79. It is true that Wingate does not control the marketing methods of retailers, who in fact place the new and second hand jeans in close proximity. But by pursuing the marketing strategies which it does, Wingate has placed in the hands of retailers a product which is very easily confused with new "LEVI'S" jeans.
80. Comparison of the two marks "LEVI'S" and "REVISE" must be made ocularly by comparing one with the other, but then it is necessary to look at the way in which the public sees the interaction of the two, namely, in retail shops, where Wingate's marketing techniques and its second hand product are an instrument of confusion.
81. I have gained assistance from the evidence in the case from consumers and people in the trade. There was evidence concerning the pronunciation of "REVISE" whether as "Revise" or "Reevise". Many people in fact pronounce Wingate's mark to rhyme with "LEVI'S", which I must say at first surprised me because it is certainly not my understanding of the customary pronunciation of the word in this country. But in the context of the relevant trade with which this case is concerned it is not surprising that there is a substantial number of people who do pronounce "REVISE" as "Reevise", to rhyme with "LEVI'S".
82. In all the circumstances in my opinion Wingate's use of the mark "REVISE" is deceptively similar to the registered trade mark "LEVI'S". It is a mark that is likely to deceive or cause confusion amongst the relevant class of persons.
83. Wingate should be restrained from infringing the two relevant trade marks of Levi Strauss.
84. It is next necessary to consider whether the sale by Wingate of second hand altered and unaltered "LEVI'S" jeans constitutes infringement of the trade marks of Levi Strauss. These questions are considered independently of the first question.
85. It is well established that a trade mark is a badge of origin, not of control. In Champagne Heidsieck et Cie Monopole Societe Anonyme v Buxton (1930) 1 Ch 330 Clauson J (at 338) rejected the proposition that a trade mark was:
"... a badge of control, carrying with it the
right in the owner of a registered trade mark to
full control over his goods, into whosesoever
hands they might come, except in so far as he
might expressly or by implication have released
this right of control."
86. It has long been recognized that registration of a mark does not give the proprietor the right to prevent the use of the mark in connection with "the genuine goods": Champagne Heidsieck Case; Farina v Silverlock (1855) 24 LJ Ch 632; Kerly's Law of Trade Marks and Trade Names, 12th ed., para. 14-29.
87. Sections 58 and 62 of the Trade Marks Act, literally construed, prevent a person, not being the registered proprietor or registered user of the mark, selling new and genuinely marked goods (i.e. those made and marked by the registered proprietor). However, such a seller of goods is not liable to be restrained because he does no more than simply tell the truth; all he says by his use of the trade mark is that the goods are connected with the registered proprietor, which in fact they are. Such use could not cause deception which is the essential test of infringement. The new genuine goods are sold by the seller albeit that he is not the registered proprietor of the mark; and the only relevant connection in trade that is indicated is with the registered proprietor.
88. The same doctrine is part of the law of the United States. In Prestonettes Inc v Coty [1924] USSC 81; (1924) 264 US 359 a trade mark owner sued to restrain the use of its trade mark upon toilet powders and perfumes. The defendant purchased the plaintiff's genuine powder, subjected it to pressure, added a binder to give it coherence, and sold it in a metal case. The defendant also bought the plaintiff's genuine perfume and bottled and sold it in smaller bottles. The Supreme Court of the United States held that the defendant, by virtue of its ownership, had a right to compound, change or divide the products it purchased and resell them as modified. The Supreme Court sustained a decree denying an injunction where the prescribed labels told the truth. Mr Justice Holmes who wrote the opinion of the Court said at 368:
"A trademark only gives the right to prohibit
the use of it so far as to protect the owner's
good will against the sale of another's product
as his ... When the mark is used in a way that
does not deceive the public we see no such
sanctity in the word as to prevent its being
used to tell the truth. It is not taboo."
Prestonettes was followed and applied by the Supreme Court of the United States in Champion Spark Plug Company v Sanders [1947] USSC 68; (1947) 331 US 125 and has been applied since by other United States courts: see for example Brandtjen and Kluge Inc v Prudhomme (1991) 765 Fed Supp 1551 at 1566. See also the English decision of Bismag v Amblins (Chemists) Limited (1940) Ch 667.
89. This principle explains the parallel import cases. Parallel importing occurs where goods sold outside Australia by or with the authority of the registered proprietor in Australia of a trade mark are imported into Australia by someone other than the registered proprietor. The courts will not permit the use of the Australian registered mark to prevent the importation of goods bearing that mark where the goods were originally marked by the registered proprietor or one of its branches or arms. The rationale is that the mark applied to the genuine goods used by the importer of the mark is a truthful use; it simply states that the goods are connected with the registered proprietor, which they are. Templeman LJ described this in Revlon Inc v Cripps and Lee Ltd (1980) FSR 85 at 116 as "substituting the monkey for the organ grinder".
90. The question whether the registered proprietor can argue that a subsequent use of the goods of which he does not approve constitutes an infringement, has arisen primarily in the context of parallel importation of marked goods. However, the present case raises the question of the circumstances in which the registered proprietor of a mark may restrain a person who deals in genuinely marked second hand or used goods from infringing his mark. Authority on the point is scarce in Australia and the United Kingdom, but there is a considerable degree of authority in the United States and in Europe.
91. The point was considered by Burchett J in Fender Australia Pty Limited v Bevk [1989] FCA 276; (1989) 25 FCR 161. Fender was a case dealing with parallel importation. The applicant was the exclusive distributor of Fender guitars in Australia and a registered proprietor of certain trade marks used in connection with Fender guitars. He had developed an Australian goodwill associated with the mark. The respondents offered for sale in Australia guitars (being new and used guitars) bearing the trade marks; the guitars had been purchased in the United States where they were manufactured and then imported into Australia. His Honour held that the applicant should succeed in its claim for infringement of its trade marks in relation to the importation and sale of new guitars, but fail in relation to the second hand guitars. He held that the sale of imported second hand guitars bearing the trade marks did not constitute use of the trade marks in the relevant sense. His Honour said (at 168):
"The connection in the course of trade which it
is the essential function of a trade mark to
denote (see the comments of Aickin J in Pioneer
Kabushiki Kaisha v Registrar of Trade Marks
[1977] HCA 56; (1977) 137 CLR 670 at 683) is a connection which
is broken by the retail sale of the goods and
their use. When they re-enter the market as
second-hand goods, although their source in the
sense of their ultimate origin remains the same,
a new origin has been interposed, and the goods
have entered upon a new commercial existence.
This is so whether the first sale was local or
overseas. There has been created a new connection
in the course of trade, which is now the relevant one."
His Honour reached this conclusion by his conception of the history and the fundamental nature of trademarks which provided a context within which s. 62 must be read. Later in his judgment he said (at 169):
"A person who sells used goods, though by
reference to a name they bore as a mark when
sold new, does not by doing so represent that
there is any connection in trade between him and
the manufacturer or original distributor of the
goods, nor that any goods so marked are wearing
his badge: cf Shell Co of Australia Limited v
Esso Standard Oil (Aust) Limited (being new and
used guitars)(1963) [1963] HCA 66; 109 CLR 407 per Kitto J at
425. Nor does he represent that there is any
connection in trade between the goods, in their
character of used goods, and the registered
proprietor of the mark. (Cf the Champaigne
Heidsieck Case, where Clauson J said that 'the
exclusive' right to use the mark conferred on
the registered proprietor ... is the right to
use the mark as a trade mark - that is, as
indicating that the goods upon which it is
placed are his goods and to exclude others from
selling under the mark wares which are not
his.') It would be an unwarranted extension of
the protection offered by the Trade Marks Act,
and an undue restriction of the freedom of
trade, to construe s. 62 as concerned with an
importation and sale of used guitars.'"
92. Burchett J's judgment has been examined in various articles including W A Rothnie, "Gray Privateers Sink Into Black Market: Parallel Imports and Trade Marks", (1990) 1 IPJ 72; C Turner, "Trade Marks and the Parallel Importation of Goods Into Australia: Resolved and Unresolved Issues" (1991) 16 UQLJ 175; M J Davison, "Parallel Importing: Unlawful Use of Trade Marks" (1990) 19 FLRev 420. See also McKough and Stewart, "Intellectual Property in Australia", 1991, pp 365-366.
93. Burchett J's reasoning seems to me to be consistent with the proposition that people who buy genuinely marked goods are free to deal with them in any way they wish provided they do not do so so as to cause deception as to their connection with the registered proprietor of the mark or a registered user thereof. The Act itself imposes some constraints upon the operation of that principle, in particular s. 63 which relates to restrictions imposed by the registered proprietor or registered user by placing notices upon the goods or their containers prohibiting various acts by subsequent owners of the goods in relation to the mark including application of the mark after the goods have been altered. However, s. 63 is subject to s. 64 which provides that the acts therein mentioned do not constitute infringement of the mark. Reference should also be made to s. 82(6) which provides that dealing in goods bearing a registered mark does not constitute infringement by reason only of the mark having been assigned to some other person after the purchaser's acquisition of the goods.
94. In Fender the plaintiff argued that there was no relevant distinction between new and second hand goods for the purposes of trade mark infringement whether the second hand goods were imported from overseas or had originally been purchased from the registered proprietor of the mark in Australia. The applicant relied upon the literal language of s. 58(1) and 62(1) of the Act. This literal approach was rejected by Burchett J who held that s. 62 must be read with reference to the context of the history and fundamental nature of trade marks. His Honour rejected the argument that the sale of second hand goods bearing a trade mark constituted an infringement of the registered proprietor's exclusive right to use the mark.
95. His Honour's reasons for holding that there was no infringement in relation to the second hand guitars were twofold: first, that the selling of the second hand guitars by reference to the trade mark on them did not indicate any trade connection between the seller and the proprietor of the mark; and secondly, it did not indicate any trade connection between the proprietor of the mark and the second hand goods as such.
96. There are decided cases which are inconsistent with Burchett J's reasoning in Fender. In Hoover Limited v Air Way (1936) 53 RPC 399 Bennett J granted an interlocutory injunction to restrain the defendant infringing the trade mark "Hoover", by selling reconditioned vacuum cleaners of the plaintiff's manufacture. The defendant had replaced the three essential parts of the vacuum cleaner: the bag, the motor and the brush. In the 12th edition of Kerly, the learned authors state at 280 that "it is by no means clear that this would now be held an infringement, apart from use on the dust bag".
97. In South Pacific Tyres New Zealand Limited v David Craw Cars Limited (1989) 3 TCLR 155 Fraser J of the New Zealand High Court, granted interlocutory injunctions to restrain the defendant from importing and selling second hand Dunlop tyres from Japan and selling them, a course which allegedly infringed the plaintiff's registered trade mark, Dunlop, under the New Zealand Trade Marks Act 1953. As to the question of the tyres being second hand, Fraser J said at 160:
"There is nothing in the words of the statute
referring to goods as either new or second-hand
and I think it would be adding in words that are
not there and would defeat the purpose of the
Act to read it as applying only to new goods sold
in the course of trade and not to second-hand goods so sold."
98. The decision of Fraser J in South Pacific Tyres was delivered two days before Burchett J delivered judgment in Fender.
99. It is important to keep in mind the differences of principle between trade mark law and passing off, a distinction not always observed in the cases including Gillette Safety Razor Company v Diamond Edge Limited (1926) 43 RPC 310. See also Rolls-Royce Motors Limited v Zanelli (1979) RPC 148 where the defendant obtained an older model Rolls Royce car, a Silver Shadow, and got it up as a new model, a Corniche, retaining the Rolls Royce trade marks. He was restrained by interlocutory injunction from using it in his trade.
102. The fact that second hand goods, whether reconditioned or not, are sold by someone other than the registered proprietor of the trade mark, but still bearing the mark, does not render its sale an infringement of the trade mark provided the manufacturer is not identified with any inferior qualities of the product which result from the wear and tear or the reconditioning. All the person is doing is telling the truth, namely, that the use of the mark is simply to indicate that the goods are connected with the proprietor albeit that they are second hand goods. The second hand dealer doubtless gets some advantage from the use of the mark, especially if it is a well-known mark; but so long as the registered owner of the mark is not identified with any inferior qualities of the goods which result from reconditioning, repair or wear and tear, the registered proprietor cannot rely upon his registration to restrain the dealer from selling goods under the original trade mark. There has been no intrusion into the protection which the Act gives the registered proprietor with respect to his mark. See Kerly, 12th ed. para. 14-31.
101. It is a question of fact whether a repaired or reconditioned article sold by someone other than the registered proprietor of the trade mark, but sold under the trade mark, links the second hand goods to the proprietor of the mark so as to identify the proprietor with the goods' inferior qualities or wear and tear. In some industries there is a well recognized practice of selling second hand goods which have been extensively reconditioned or repaired, yet sold with the original trade mark upon them. But it is general knowledge within the trade and the mind of the public that this work has been done by persons whose business it is to do it and who have no connection with the manufacturer. For example, there are many manufacturers and distributors of spare parts for motor vehicles; but if one buys say a second hand Holden or Ford car, the fact that it may have many replacement parts that are not of a Holden or Ford origin will not necessarily lead to the second hand seller infringing the Holden or Ford marks. This is similarly true in the case of second hand white goods such as refrigerators and washing machines.
102. The Supreme Court of the United States dealt with the question in Champion Spark Plug Co v Sanders. That was a case for infringement of a trade mark and unfair competition brought by a manufacturer of spark plugs against a person who reconditioned and sold used spark plugs under the trade mark name. The question before the Supreme Court related only to the adequacy of the relief that had been granted by the courts below, particularly the refusal of the Circuit Court of Appeals to require the respondents to remove the word "Champion" from the repaired or reconditioned plugs which they resold. Although the case dealt essentially with the question of adequacy of relief, the Supreme Court restated the principles which had been enunciated by Mr Justice Holmes in Prestonettes to which reference has been made. The case is high authority in the United States for the proposition that a trade mark cannot be relied upon to restrain the sale of reconditioned or second hand goods unless the manufacturer is identified with the inferior qualities of a product resulting from wear and tear or reconditioning. The Supreme Court recognized (at 129) that there could be cases "where the reconditioning or repair would be so extensive or so basic that it would be a misnomer to call the article by its original name, even though the words 'used' or 'repaired' were added"; but it also observed (at 129-130) that inferiority is expected in most second hand articles and that they generally therefore cost the customer less. Champion, together with other US cases including Brandtjen and Kluge, are authority for the proposition that the product's inferiority is immaterial "so long as the article is clearly and distinctly sold as repaired or reconditioned rather than as new" (Champion at 130).
103. An example of a case in the United States where the reconditioning or repair was so extensive or basic that it was a misnomer to call the article by its original name is Bulova Watch Company Inc v Allerton Company Inc [1964] USCA7 48; (1964) 328 F 2d 20. In that case the owner of a trade mark "Bulova" was said to be infringed by the defendant's substitution of a new and different crown and case whilst retaining the trade mark on the face of the watch. The United States 7th Circuit Court of Appeals held that the substitution by the defendant of different crowns and cases of wristwatches in effect was to substitute a different product. The watch was no longer a Bulova watch.
"It is a new and different 'watch' albeit one
containing a 'movement' manufactured by Bulova.
The case is not Bulova's and its fitting does
not represent Bulova workmanship. As recognized
in Champion Spark Plug, change in the original
article may be such that the party making the
change is without right to retain or use the
manufacturer's trade-mark in connection with the
resale of the changed product." (at 23).
104. I was referred to a number of cases decided by French and German courts in which the first applicant in the present case (or one of its related companies) successfully restrained local companies from producing and selling second hand "LEVI'S" jeans (still bearing Levi Strauss trade marks) which had been subjected to various processes including redyeing and rewashing including stonewashing. The rationale of these cases and of the United States cases is essentially the same, namely, that the public must not be deceived; the mere fact that "LEVI'S" jeans are sold second hand by persons other than one of the Levi Strauss companies does not entitle Levi Strauss to injunctive relief under trade marks legislation.
105. The trade mark owner's rights with respect to the mark are substantially exhausted once the trade mark owner brings the goods onto the market for the first time and they are sold to the public. But when the original goods have been so changed or altered that there is no longer a basis for the guarantee resulting from the trade mark that the origin of the goods is from the business of the registered proprietor of the mark, this is a new use of the mark without the permission of the registered proprietor and therefore contrary to law. In particular, the courts have held that the dyeing to another colour of jeans affects the "guarantee function" of a trade mark. The plaintiff's trade mark gives the guarantee that the colour as well as the entire appearance comes from the plaintiff's factory which leads the customer to conclude that the plaintiff is responsible for the appearance of the jeans as presented to the public. See Levi Strauss and Co v Eden Roc Sarl, judgment of the County Court of Paris, 3 May 1988; Levi Strauss and Co v SALE GmbH, judgment of the District Court of Hamburg after a hearing on 19 November 1992; and Levi Strauss and Co v Tango GmbH, a judgment of the District Court of Munich, 17 December 1992.
106. In the case of the sale of most second hand goods the public would assume, it seems to me, that they are likely to be worn and to have been subjected to some process of repair, including stitching or cutting, and generally they would be cheaper. Although the goods, assuming they bear the registered trade mark of the original owner, would no doubt be bought at least partially because of the reputation associated with that owner through the trade mark, the buyer would not assume that the second hand seller is, or is connected with, the original owner of the goods. The exception to this is, I think, the principle which is recognized in the overseas cases to which I have referred, namely, that it does derogate from the rights attaching to a trade mark if repair or reconditioning is so extensive or fundamental that it is a misnomer to call the article by its original name and so as to result in the marketing of a different product. In such a case the manufacturer is entitled to protection of its mark as the producer and marketer of the original product: see Kerly, 12th ed, para. 14-31.
107. In Kerly's Law of Trade Marks and Trade Names, 6th ed., at 452 (and repeated in later editions including the 12th ed. para. 14-31) Condy v Taylor (1887) 56 LT 891 is cited as authority for the proposition that goods of the plaintiff adulterated by some other person are not goods on which the mark may lawfully be placed. Condy v Taylor does not support that proposition either as read in the Law Times Report or as more fully reported in 3 TLR 667.
108. If a registered proprietor wishes to ensure that its mark is no longer used after the goods have been altered or reconditioned, it can of course resort to s. 63 of the Act and place the appropriate notices upon the goods or the container in which the goods are housed, prohibiting the doing of the Acts to which the section applies. The present is not such a case, nor is it suggested that it is.
109. Once goods manufactured by the registered proprietor of a trade mark which is affixed to the goods pass beyond retail sale, they have for most purposes ceased to be in the course of trade, having been bought for consumption. Speaking generally, the rights conferred by registration upon the owner of the mark will not extend beyond the point of retail sale and consumption or use by the consumer. I do not accept, however, that the rights of the registered proprietor of the mark are extinguished after they have been bought for consumption. They may be dormant, and generally will not awaken, because retail sale and subsequent use of the goods in most cases breaks the connection between the goods and the trade mark owner. But in some circumstances goods may re-enter the market as second hand goods, which may create a new connection in the course of trade. It does not follow that the old connection has been destroyed. The proprietor of a registered trade mark has the exclusive right to distinguish his goods from those of other traders. These rights remain notwithstanding that the goods which bear the mark have for most practical purposes ceased to be in the course of trade.
110. Care must be exercised with the notion that when goods re-enter a market as second hand goods a new origin has arisen and the goods have entered upon a new commercial existence. This new existence is more readily perceived in the case of some goods than others. As mentioned earlier, second hand motor cars and second hand electrical appliances provide clear instances of a secondary market because of the existence of a large and well-known second hand motor car market and second hand appliance market together with spare parts markets. If a person buys a second hand refrigerator still bearing the mark of the original owner, the buyer probably assumes that spare parts have been put into the article after it has been used by its purchaser and were not necessarily manufactured by the original owner. A point may be reached, however, where the reconditioning has reached such a level that there is simply no resemblance between the goods as originally sold and the second hand goods as reconditioned which might constitute infringement of the mark.
111. When Burchett J said in Fender that if second hand goods re-enter the market as such, although their source in the sense of their ultimate origin remains the same, a new origin has been interposed and the goods have entered upon a new commercial existence, I do not think his Honour was saying that the old origin has gone forever. If this was his Honour's statement (and I do not think it was) I would respectfully disagree. If that were the law then it would be a passport for traders in this country to practice deception on the public. When a mark is used in such a way that it does not deceive the public and is simply telling the truth, such use cannot be restrained. Use of the mark which does deceive the public and does tell untruths can be restrained by the registered proprietor.
112. Also, it must be kept in mind that in actions for infringement of trade marks the question is whether the respondent is using the registered mark without permission as a trade mark inconsistently with the exclusive right of the owner of the mark to distinguish his goods from those of other traders: see Mark Foy's Limited v Davies Coop and Co Ltd [1956] HCA 41; (1956) 95 CLR 190; The Shell Co of Australia Limited v Esso Standard Oil (Australia) Limited [1963] HCA 66; (1963) 109 CLR 407. This question is not answered by reference to notions of goodwill, unlike passing off actions where questions of goodwill are fundamental to the action.
113. The question to be kept steadily in mind is whether the alterations or repairs that have been made to "LEVI'S" jeans by the respondents are such that the goods are being represented as other than what they were initially when produced by Levi Strauss: see Imperial Tobacco Co of India Limited v Bonnan (1924) AC 755 at 763.
114. The question is whether the respondents are in effect telling the truth in the market place. Has the reconditioning or repair to the original jeans been so extensive or basic that it is a misnomer to call them "LEVI'S" jeans? This is in my opinion the correct test to apply in Australia.
115. The jeans sold by Wingate as second hand jeans fall into the following classifications. All have been washed or laundered.
(a) Perfect
(b) Worn or damaged
(c) Very worn or damaged
(d) Worn or damaged with repairs such as darning
(e) Stonewashed
(f) Patched - with flags, cartoons, suede or other forms of
patching.
(g) Cut-off so as to convert into shorts
(h) Colour stripped or bleached
(i) Dyed
(j) Painted
116. In my opinion Levi Strauss fails in its attempt to establish that the second hand "LEVI'S" jeans marketed by Wingate in categories (a) to (d) inclusive have so fundamentally changed the character of the Levi Strauss product as to be a different product. However, the classifications (e) to (j) inclusive in my opinion do fundamentally change the character of the jeans.
117. Stonewashing subjects the denim (as indicated earlier) to severe stress which requires Levi Strauss when it produces the jeans to exert considerable quality control and which leads to the rejection of considerable numbers of jeans from their classification as first grade jeans. The stonewashing to which Wingate or its sub-contractor subjects the second hand jeans has much the same impact on the jeans, though with less adequate safeguards and controls in the process of stonewashing than those adopted by Levi Strauss. Levi Strauss led evidence (which is not disputed) of its high quality control; and Mrs Woolley conceded that Wingate's goods are of inferior quality. Stonewashing is a very substantial interference with the jeans and with their quality and durability.
118. Having considered all the evidence, in my opinion, although patching of "LEVI'S" jeans by Wingate varies in its extent, generally it is in my view patching of such a kind as to lead to a new product. Cutting off jeans of ordinary length to shorts is such a substantial interference as to change the basic nature of the product. So is colour stripping or bleaching. Dyeing is a recasting of the product in such a material way as to turn it into a different product. Similarly with painting. Consumers would tend to assume when they were buying second hand "LEVI'S" jeans that they had been laundered, perhaps slightly repaired or darned; but they would assume that the colour of the jeans was the colour which they initially bore when they came from the Levi Strauss factories. They would not expect to find shorts as being other than shorts that had been produced as such by the factories originally.
119. The work embodied in classifications (e) to (j) is of a substantial nature and I find myself in agreement in substance with the reasoning of the European cases on this point which is, as I have said, also basically consistent with the reasoning of the United States Supreme Court in the cases to which reference was made earlier.
120. Injunctions should be granted against Wingate and Mrs Woolley to restrain them from infringing the trade mark rights of Levi Strauss with respect to the altered goods in categories (e) to (j) inclusive.
121. It was argued by counsel for the respondents that, having regard to the history of s. 63(1) of the Act, neither s. 58(1) nor s. 62(1) should be construed as extending to circumstances which are covered by s. 63(1). I cannot accept that argument.
"(1) Where, by notice upon goods or upon
the container of goods, the registered
proprietor or a registered user of a trade mark
registered in Part A or Part B of the Register
makes a statement prohibiting the doing of an
act to which this section applies, a person who,
being the owner for the time being of the goods,
does that act, or authorizes it to be done in
relation to the goods in the course of trade or
with a view to a dealing with the goods in the
course of trade, infringes the trade mark unless -
(a) at the time when that person agreed to buy
the goods he acted in good faith without
notice that the statement appeared on the goods; or
(b) he became the owner of the goods by virtue
of a title derived from another person who
had so agreed to buy the goods.
(2) The acts to which this section applies are -
(a) the application of the trade mark upon
goods after they have suffered alteration
to their state, condition, get-up or packing;
(b) in a case in which the trade mark is upon
the goods, the alteration, partial removal
or partial obliteration of the trade mark;
(c) in the case in which the trade mark is
upon the goods and there is also other
matter upon the goods, being matter
indicating a connexion in the course of
trade between the proprietor or registered
user and the goods, the removal or
obliteration, whether wholly or partially,
of the trade mark unless that other matter
is wholly removed or obliterated;
(d) in a case in which the trade mark is upon
the goods, the application of some other
trade mark to the goods; and
(e) in a case in which the trade mark is upon
the goods, the addition to the goods of
other matter, in writing or otherwise,
that is likely to injure the reputation of
the trade mark.
(3) In this section, references, in
relation to goods, to the registered proprietor,
to a registered user and to the registration of
a trade mark shall be construed, respectively,
as references to the registered proprietor of
the trade mark, to a registered user of the
trade mark and to the registration of the trade
mark, in respect of those goods, and the
expression 'upon' includes, in relation to
goods, a reference to physical relation to the goods."
123. Whether or not the rights of the registered proprietor of the mark shall extend to prohibit the doing of any of the acts specified in s. 63(1) of the Act was the subject of extensive debate in England prior to the enactment of the Trade Marks Act 1938 (see the Goschen Report, 1933 at 45-49) and in Australia prior to the enactment of the Act (see the Dean Report, 1954, paras. 92-97). Section 6 of the English Act of 1938 and s. 63 of the Act were introduced to overcome what some people considered to be an inadequacy in the law as it then stood.
124. Even if that proposition for which counsel argued is correct it would not avail the respondents in the present case. Section 63(2)(a) does not apply here because the only relevant trade marks that are applied to the goods with which this case is concerned are the initial marks of Levi Strauss which were applied at the time of manufacture.
125. The object of s. 63 is to enable a proprietor of a mark to impose certain restrictions which will to some extent "run with the goods", thus constituting an exception to the rule of the general law that a vendor of goods may not impose conditions restricting their use that will run with the goods so as to affect subsequent purchasers. An exception exists in the case of patented articles because the statutory monopoly conferred upon the patentee confers the right to grant a limited licence to use the goods; thereby enabling the patentee to impose conditions that will affect subsequent purchasers having notice of the existence of the conditions at the time of sale: National Phonograph Company of Australia Limited v Menck (1911) 28 RPC 229.
126. Section 63 differs from s. 6 of the 1938 English Act in that the former requires a statement to be placed on the goods or on their containers, rather than the making of a contract in writing, to establish the obligation in question. Paragraph (e) of sub-s. (2) does not avail the respondents in this case because it does not apply to the acts of the respondents of which Levi Strauss complains. Paragraph (e) of s. 63(2) is directed to the case where something is added to the goods, not necessarily a defacement of the mark, but something, whether it be in writing or otherwise, that diminishes the mark in some way: something that is in the nature of a defacement of the mark. The equivalent provision (not identical) in s. 6(2)(e) of the English Act of 1938 refers to the addition to the goods "of any other matter in writing" that is likely to injure the reputation of the trade mark. Yet in the Dean Report (paras. 92-97) the recommendations of the committee were that s. 63 adopt the provisions of the English Act of 1938 "only in respect of the abuses referred to in paragraph 93(a) of the report, namely, defacement, obliteration or removal of the mark". Although the language of para. (e) is somewhat wide, in my view it does not encompass acts of the kind of which complaint is made by the applicants in the present case.
127. Although there may be cases when unaltered second hand goods are sold by someone other than the proprietor of the registered mark which could constitute infringement of the mark, generally speaking it would not, and does not in this case.
130. The guarantee given by the Levi Strauss badge of origin is not affected in the circumstances of this case with respect to unaltered goods.
129. There is no dispute that Levi Strauss has the necessary goodwill sufficient to sustain a case for passing off. Nor is it disputed that Mrs Woolley is knowingly concerned in each of the acts of Wingate as she is the driving force in Wingate.
130. The principles which relate to the tort of passing off are well established; I need not repeat them. I have set out earlier the matters which I regard as relevant in determining whether there has been an infringement of the true trade mark "LEVI'S" by the respondents' use of the label "REVISE". Those matters apply also to passing off and s. 52 and in particular I refer to the following:-
. the various forms of the "REVISE" labels that have been used since
their inception (omitting the first label);
. both products are sold in shops which sell new goods (some do sell
both new and second hand goods); but Wingate's products are not
sold in second hand shops such as "Op shops";
. both "REVISE" jeans and "LEVI'S" jeans are sold alongside each
other (and it is only new "LEVI'S" that are sold by Levi Strauss);
. the prices of the two sets of goods are broadly comparable, though
prices for "REVISE" jeans are generally less than for "LEVI'S"
jeans; but not always;
. broadly speaking both goods are sold to the same range of
consumers;
. the label "REVISE" appears on each of the pairs of jeans which
have a number of the trade marks of Levi Strauss appearing on
them, so that the minds and eyes of the consumers and members of
staff of retail stores are inevitably drawn at the same time to
the marks of Levi Strauss and the label "REVISE".
I would add the important element that Wingate has in this case put into the hands of the retailers a product which does have inherent potential to mislead the public and this can be an important element in passing off or misleading or deceptive conduct under s. 52: see Puxu Pty Limited v Parkdale Custom Built Furniture Pty Limited [1980] FCA 73; (1980) 43 FLR 405; Reddaway v Banham (1896) AC 199; Singer Manufacturing Co v Loog (1882) 8 App Cas 15; Draper v Twist (1939) 56 RPC 439. Mere tendency to confuse the public is not sufficient to found a case under s. 52 (Puxu); but the facts of this case go beyond confusion. I am satisfied that a substantial section of the public is misled into believing that second hand "LEVI'S" jeans sold under the "REVISE" label are being sold by Levi Strauss or by some enterprise with its authority or under its aegis.
131. Wingate can if it wishes remove the Levi Strauss emblems and marks from its garments. There is no notice placed upon the goods or their containers under s. 63 to prevent this. It is not in my view an accident that Wingate seeks to market its product with prominence being given to the various Levi Strauss trade marks. Plainly the whole marketing strategy of Wingate is to sell second hand "LEVI'S" jeans (they being the particularly relevant products), making it very clear to the public that they are "LEVI'S" jeans with all the goodwill and background of Levi Strauss that attaches to them, the benefit of which will rub off onto Wingate, although the "REVISE" label makes it reasonably clear that they are second hand goods.
132. I do not accept the submission of counsel for the respondents that the evidence of confusion is weak and does not support a finding that there has been any significant confusion occurring in the market place as a consequence of the trading activities of Wingate. Nor do I accept the submission that Levi Strauss has itself contributed to any confusion which has occurred and failed to take reasonable steps to dispel such confusion as may have arisen.
133. As to Mrs Woolley, it is plain that she was knowingly concerned in the relevant contravention of s. 52. In my opinion she intended at all material times to achieve the result which was in fact achieved by Wingate.
134. Levi Strauss asserts that the respondents have breached s. 65D of the Trade Practices Act 1974 which prohibits a corporation in trade or commerce from supplying goods that are intended to be used or are of a kind likely to be used by a consumer, being goods of a kind in respect of which a consumer product information standard has been prescribed, unless the corporation has complied with that standard in relation to those goods.
135. This is a minor aspect of the case and little attention was given to it in the course of evidence or argument. As I propose to stand the matter over to a date to be fixed so that the parties may consider my reasons for judgment and Levi Strauss may bring in appropriate short minutes, counsel and solicitors for the parties should consider in the meantime addressing me briefly on the question of care labelling. Levi Strauss seeks an injunction to restrain a breach of s. 65D but does not seek damages. If Levi Strauss presses this claim then it must address the Court on the point afresh in the light of the findings that have been made.
136. There is one matter I wish to refer to before parting from the case. A few years ago Mrs Woolley established a business in this country which has been very successful, a business of dealing in second hand goods including the products of Levi Strauss, in particular "LEVI'S" jeans. It has become quite a large business and no doubt one that is profitable to Wingate. The effect of the Court's orders, when made, will be to curtail her business activities by quite a serious degree. She will not be able to sell "LEVI'S" jeans under the label "REVISE" so long as the "REVISE" products are sold in retail stores selling new jeans. Even in the case of sales to shops that deal only in second hand goods there may still be a problem for the reasons which I have given; but the fact that "REVISE" goods have been sold to stores that are primarily retail stores that deal in new goods is of course a very basic problem that confronts Wingate. I wish counsel and solicitors to give careful attention to the framing of the appropriate orders to protect the legitimate interests of Levi Strauss but go no further than this, so that Wingate can fashion its business activities in the future by absorbing the blow that the orders of the Court will impose upon it, but so far as possible to leave it free to pursue its legitimate business activities. If problems arise in discussions between the legal advisers and agreement cannot be reached, then any difficulties will have to be ventilated before the Court and determined by me in a subsequent brief hearing.
137. Mrs Woolley has shown initiative and imagination in her promotion of the "REVISE" product; but when the business of her company, Wingate, is to promote in the way she has the sale of second hand products of Levi Strauss, problems of the kind to which my judgment has been directed have arisen. The problems are exacerbated and highlighted by the fact that this is a case where Wingate seeks to sell second hand "LEVI'S" jeans which bear not only the label of "REVISE" upon them but also various trade marks of Levi Strauss.
138. I do not propose to make any orders today except to stand the matter over to a date to be fixed and to direct Levi Strauss to bring in short minutes of order to give effect to the Court's reasons for judgment.
Levi Strauss and Co and Levi Strauss (Australia) Pty Limited
Wingate Marketing Pty Limited and Eileen Mary Woolley [1993] FCA 325;
(1993) 116 ALR 298
(1990) 24 FCR 370
(1963) 109 CLR 407
(1977) 137 CLR 670
(1956) 95 CLR 190
(1993) 43 FCR 344
(1954) 91 CLR 592
(1988) 15 NSWLR 158
(1964) 109 CLR 407
(1937) 58 CLR 641
(1952) 86 CLR 536
(1989) 25 FCR 161
(1980) 43 FLR 405