Louis Vuitton Malletier SA v Knierum

REASONS FOR JUDGMENT 1 The applicant, Louis Vuitton Malletier SA, reached an out of court settlement with the first respondent, Mr Knierum, in relation to its trade mark infringement action. It now wishes to get out of that settlement and press on with the case. In a rather extraordinary letter written to my associate, but intended to be brought to my attention, the applicant's solicitors, Corrs Chambers Westgarth, stated that because I had not made orders in the form agreed by the parties (orders which they acknowledge were discretionary and if inappropriate should not be made) "settlement has been legally frustrated, [and] our client does not seek any Orders from the Court at this time, and has no alternative but to proceed with the litigation [against the first respondent]". The letter concludes with the request that my associate thank me "for [my] indulgences in this matter, which they [the solicitors] greatly appreciated". 2 The applicant cannot so easily avoid its agreement with the first respondent. In order to explain why, I must deal with a number of matters. First there are the facts which lie behind the action. They are short and simple. The first respondent was caught red-handed importing handbags and wallets and an umbrella which infringe a number of the applicant's registered trademarks. The infringing goods were seized by customs at the time of entry pursuant s 133 of the Trade Marks Act 1995 (Cth). The first respondent purchased the seized goods in China. He purchased 185 items in total but was unable to bring them home as accompanied luggage. He brought some with him and sent the rest by post. The first respondent said that he purchased the goods to present as gifts to his family and friends at a "second wedding" he and his wife were planning to hold in Brazil. This is hard to believe; it is more likely that the first respondent intended to sell the goods for a profit, but I need not make a finding to that effect. 3 The applicant brought this action when it learnt of the second shipment. It sought the usual relief including declarations of infringement, negative injunctions restraining further infringements, damages or an account of profits, delivery up on oath of all infringing goods, orders for forfeiture, costs and interest. In short order, the applicant moved for summary judgment. Affidavits in support and one opposing the application were filed. It was at that point that the action settled. Although he did not have a lawyer, the first respondent knew that he had no choice but to compromise the claim on the best available terms. The material in support of the summary judgment application, as well as his own affidavit indicated, even to a layperson, that he had no defence. The sooner the first respondent settled the action, the less the legal costs he would have to pay. 4 Following the settlement, the parties submitted minutes of proposed orders which the court was asked to make by consent. The proposed orders included permanent injunctions restraining the first respondent from infringing the applicant's trademarks as well as orders requiring him to deliver up on oath for destruction any goods and documents (such as catalogues, price lists and brochures) in his possession which bore any of the applicant's trademarks. 5 I was not prepared to make the orders pursuant to O 35 r 10 which is the rule that permits a judge to make a consent order in chambers. There were several matters which concerned me. First, Mr Knierum was not represented by a lawyer and I wanted to satisfy myself that he understand the consequences if he breached the injunction. Secondly, a person commits an offence under the Trade Marks Act if he intentionally imports goods into Australia for the purpose of trade if he knows, or is recklessly indifferent to the fact, that a registered trademark has been falsely applied to those goods: s 146. The penalty for such an offence is a fine not exceeding $55,000, imprisonment for a period not exceeding two years or both a fine and imprisonment: s 149. The imposition of an injunction in such a case would put the first respondent at risk of committing two "offences" if he repeated the conduct; first for breach of the statute and second for breach of the injunction. In Australian Securities and Investment Commission v Burton-Clay (2003) 21 ACLC 651, I referred to a number of cases which stand for the proposition that, in similar circumstances, the grant of a permanent injunction may be oppressive. On this issue I acknowledge that it may be of relevance that the statute which creates the offence also provides for an injunction as an appropriate remedy for infringement: see s 126 of the Trade Marks Act. Nevertheless I wanted to hear argument on the point. 6 I listed the case for mention on 4 November 2004. I raised my concerns with Mr Masterson, who appeared for the applicant. Mr Masterson very fairly and sensibly acknowledged the problem and agreed to my suggestion that the injunctions should be limited to a period of five years. I made some other changes, and then the orders were pronounced. 7 That seemed to be the end of the matter. However, later that day Mr Stern, a senior partner at Corrs Chambers Westgarth, asked that the matter be relisted. Mr Stern said he wished to present further argument in relation to the duration of the injunctions. 8 It is well settled that a court has the power to recall an order before it is entered: see O 35 r 7(1) of the Federal Court Rules. The court also has an inherent jurisdiction to recall an order. It is true that the power to vacate an order must be exercised with great caution and that the circumstances which would justify a rehearing must be "quite exceptional": State Rail Authority of New South Wales v Codelfa Construction Proprietary Limited (1982) 150 CLR 29, 38. Usually the power to recall an order is only exercised to deal with technical or incidental changes to the form or contents of an order. But as Mason CJ said in Autodesk Inc v Dyson No 2 (1993) 176 CLR 300, 303 if the court has "proceeded according to some misapprehension of the facts of the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing" then the jurisdiction can be exercised. 9 Accordingly, I listed the matter on 23 November 2004 for mention. On this occasion Mr Stern appeared for the applicant; the first respondent appeared in person by telephone. The burden of Mr Stern's submission was twofold. First he said that it was the inevitable practice of judges dealing with intellectual property cases to grant permanent injunctions if plaintiffs succeeded in establishing an infringement of their rights. Mr Stern said that he could not recall a case where a judge had refused such relief. His second point was that a judge should implement the agreement where an action has been compromised on terms that a permanent injunction be granted. During the course of his submissions Mr Stern modified his argument somewhat. He accepted that in the case of discretionary relief, the judge could refuse to make the orders sought. Although he did not say so, I think that Mr Stern meant that it is only in exceptional cases that a judge should refuse to go along with the parties agreement. 10 The points raised by Mr Stern are very important. I enquired whether he had any authorities to support his submissions. Mr Stern said that he was not in a position to refer me to any cases but, if given a short period, he would refer me to the relevant authorities. Accordingly, the application was stood over to enable Mr Stern to send up the cases. However Mr Stern did not do what he said he would. Rather the applicant decided to continue with its action against the first respondent. Now Ms Strong appears to argue for this outcome. 11 There is a problem which stands in the way of the applicant's desired course. The problem is that I have already made orders which dispose of the case against the first respondent. The fact that those orders have not been entered is beside the point. The position is that the applicant's cause of action against the first respondent has merged in the orders which were made in open court on 4 November 2004. 12 The only application which is still current is the applicant's request that I recall the orders before they are entered. Save for one change that I will make to the orders I will not accede to that application. I do not think that I erred in modifying the proposed consent injunction which the parties had initially sought. Having now looked at the cases I am satisfied that it would have been wrong for me to grant that injunction, especially against an unrepresented person who has no knowledge of the applicable legal principles. 13 Putting to one side intellectual property cases, three conditions must be satisfied before a court will grant an injunction. First, the plaintiff must show that the defendant threatens and intends to do some act in the future. Second, the act which the defendant threatens must, if done, violate the plaintiff's legal rights. Third, the right must be one which is normally protected by an injunction: Ashburner's Principles of Equity (2nd ed) at 337. The cases which establish that an injunction will not be granted unless there is evidence that an illegal act will be done in the future, include Stannard v Vestry of Saint Giles, Camberwell (1882) 20 Ch D 190 and Proctor v Bayley (1889) 42 Ch D 390. 14 Is the position any different in intellectual property cases? Should a successful plaintiff be entitled to an injunction as of right? There is at least one case which supports the applicant's contention. That case is Colgate Palmolive Limited v Markwell Finance Limited [1990] RPC 197, a decision of Falconer J, a very experienced intellectual property judge. In the context of a discussion about the costs of two actions that had been heard together, one for passing off and the other for trademark infringement, Falconer J (at 200) said: "It is a well settled principle supported by an abundance of authority that, in respect of property rights, in particular intellectual property rights such as patents, copyrights, trade marks and the right to protect goodwill against passing off, a person whose right has been infringed is entitled to come to court to have his rights pronounced upon and vindicated and to an injunction against the infringer." Similar comments can be found in a few other cases. Falconer J suggests that it is easier to obtain an injunction in an intellectual property case than in other types of litigation. If taken literally, it means that a plaintiff in an intellectual property case may obtain an injunction without establishing that his rights will be infringed in the future. It is sufficient that there has been an infringement in the past. 15 I have looked at all the cases which Falconer J says support his proposition. I have also looked at many other cases. With great respect to the judge, those cases make it quite clear that Falconer J has stated the principle too broadly. The true position is this. The basis for the grant of an injunction in an intellectual property case is in every respect the same as in any other case. The plaintiff must show that there is a risk that the defendant will engage in infringing conduct in the future. If the plaintiff is unable to make good that proposition, he will not obtain an injunction. 16 The authorities which I have consulted and which establish what I have just said include: Proctor v Bayley (1889) 42 Ch D 390; Leahy, Kelly and Leahy v Glover (1893) 10 RPC 141; Shelfer v City of London Electric Lighting Company [1895] 1 Ch 287; Samuelson v Procedures' Distributing Co Ld (1931) 48 RPC 580 but compare Samuelson v Procedures' Distributing Company Limited [1932] 1 Ch D 201; Raleigh Cycle Coy. Ld v H Miller & Coy. Ld. (1949) 66 RPC 23; Treasure Cot Coy. Ld v Hamley Bros Ld (1950) 67 RPC 89; Pride of Derby and Derbyshire Angling Association Ld v British Celanese Ld [1953] Ch 149; Performing Right Society Ltd v Butcher [1975] FSPLR 405; Phonographic Performance Ltd v Maitra [1998] 1 WLR 870; Coflexip SA v Stolt Comex Seaway MS Ltd [1999] 2 All ER 592. 17 On the question of proof of the risk of repetition some judges have been prepared to infer that risk simply from past infringement. But the better view is expressed by Laddie J in Coflexip SA v Stolt Comex Seaway MS Ltd [1999] 2 All ER 592, where he said (at 605) that it is simply not right to treat [all intellectual property right] infringers as "bad apples". 18 In this case the first respondent is an infringer. His attempt to explain his conduct is unconvincing. There is however, little prospect of him re-offending. First, the risk of being caught is great. Second, the consequences of being caught, even only in costs, are likely to be more than the first respondent could bear. Third, he has not engaged in any other conduct from which it might be inferred and that he is likely to be a repeat offender. Finally, when I pressed Mr Stern on the point he conceded that he did not have available to him any evidence which would justify a finding of likely repetition. 19 If this case had gone to trial I would not have granted any injunction against the first respondent: first for the "double penalty" point and second for the lack of threat of repetition. If I had been requested to do so, then as the part of the final orders, as is often done, I would have given the applicant liberty to apply for injunctions in the event that the first respondent repeated his infringement or threatened to do so. Examples of cases where such orders have been made include: Wilcox v Steel [1904] 1 Ch 212; Brigg v Thornton [1904] 1 Ch 386; Attorney-General v Birmingham Tame and Rea District Drainage Board [1910] 1 Ch 48; Samuelson v Producers' Distributing Co Ld (1931) 68 RPC 580; Raleigh Cycle Coy Ld v H. Miller & Coy. Ld. (1949) 66 RPC 23; Treasure Cot Coy Ld. v Hamley Bros Ld (1950) 67 RPC 89; Wayne V Myers Coy., Ld v L.E. Fields Auto Services Ld (1954) 71 RPC 435. 20 Does it make any difference that the parties had agreed that permanent injunctions should be granted? Should that fact be treated as a concession on the first respondent's part that the applicant was entitled to think that he would infringe again? I am not prepared to draw this inference, especially in a case where the respondent has acted without legal advice. I do not mean to imply that the first respondent has been railroaded into the terms of settlement. What I do know is that the terms of settlement, at least in relation to the proposed injunction, were ill advised, and would not have been agreed, in my view, if the first respondent had been advised by a lawyer. For this reason I give no weight to the fact that the first respondent had accepted that a permanent injunction should go. 21 I am persuaded that, in one respect, the orders should be varied. Ms Strong reminds me that the injunction in its originally proposed form, included a restraint on the first respondent in the course of trade from using the applicant's marks not only on its registered goods but any "goods of the same description as the Louis Vuitton Registered Goods"; the expression Louis Vuitton Registered Goods is defined in the orders. Originally I thought this language too unclear and reworded it. Ms Strong reminds me that the language comes from the statute itself and that my substitute form of words is likely to cause confusion. I think that I should modify the order to introduce the original language. 22 Save for that amendment I refuse to recall my orders. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.