Paco Nominees Pty Ltd v Ella Secret Australia Pty Ltd [2025] FCA 366 | Case summary

Paco Nominees Pty Ltd v Ella Secret Australia Pty Ltd [2025] FCA 366 | Case summary | Zoe

[55]

The meaning of the term "uses as a trade mark" was described in Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; 277 CLR 186, (at [23]-[25]):
1. Use of a trade mark in relation to goods means use of a trade mark upon, or in physical or other relation to, those goods, and so can include use of the mark on product packaging or marketing such as on a website. There is a distinction, although not always easy to apply, between the use of a sign in relation to goods and the use of a sign as a trade mark. A trade mark is a sign used, or intended to be used, to distinguish goods dealt with by one trader from goods dealt with by other traders; that is, as a badge of origin to indicate a connection between the goods and the user of the mark.
2. Whether a sign has been "use[d] as a trade mark" is assessed objectively without reference to the subjective trading intentions of the user. As the meaning of a sign, such as a word, varies with the context in which the sign is used, the objective purpose and nature of use are assessed by reference to context. That context includes the relevant trade, the way in which the words have been displayed, and how the words would present themselves to persons who read them and form a view about what they connote. A well known example where the use was not "as a trade mark" was in Irving's Yeast-Vite Ltd v Horsenail, where the phrase "Yeast tablets a substitute for 'Yeast-Vite'" was held to be merely descriptive and not a use of "Yeast-Vite" as a trade mark. Therefore, it did not contravene the YEAST-VITE mark.
3. The existence of a descriptive element or purpose does not necessarily preclude the sign being used as a trade mark. Where there are several purposes for the use of the sign, if one purpose is to distinguish the goods provided in the course of trade that will be sufficient to establish use as a trade mark. Where there are several words or signs used in combination, the existence of a clear dominant "brand" is relevant to the assessment of what would be taken to be the effect of the balance of the label, but does not mean another part of the label cannot also act to distinguish the goods.

[62]

By the applicants' statement of claim and in its application for default judgment, the applicants both sought pecuniary and non-pecuniary relief. However, neither the pleaded claim nor the additional evidence relied upon, clearly distinguished their claims. When this issue was raised with Counsel at the beginning of the hearing, Counsel only pressed the claims for damages, on behalf of Paco, the owner of the trade marks. This position appeared consistent with the evidence.
Paco claims the sum of $20,000 for the diminution of its reputation pursuant to s 126(1) of the TM Act. It does so on the basis of the deemed admission that, both Paco and Geedup Online, have generated substantial goodwill in the Australian market with respect to the Geedup Trade Marks (SOC [9]), such that there is consumer expectation that apparel, including hoodies, promoted and sold under, by reference to and bearing the Geedup Trade Marks are the applicants' goods, goods that have their sponsorship or approval and/or have been designed and manufactured to the quality standards authorised or approved by them (SOC [10]). As adverted to above, the evidence of Mr Kneumann confirms, but does not alter the pleaded case.
The respondents admit that by reason of their wrongful conduct that the applicants have suffered loss and damage. The pleading, save for in particulars, does not identify or specify the source of that loss. There is no evidence of any quantified lost sales, business and licence payments. There is evidence of the fact of sales on the occasion of the two trap purchases. There is evidence as to the amount the counterfeit goods were sold for: Track pants sold for $90.00 on 25 August 2024 (where the authentic product sells for $130.00 to $170.00) and a hooded jumper sold on 8 September 2024 for $93.00 (compared to the authentic product retailing for $170.00 to $220.00). Paco has established that it is likely to have suffered loss or damage from lost sales but where the amount is not calculable.
As to Paco's claim of diminution of reputation, the applicants have established they have generated goodwill and have a reputation to protect. Damages for reputational loss are insusceptible to any precise calculation: Madden v Seafolly Pty Ltd [2014] FCAFC 30; 313 ALR 1 at [116].
Here the unchallenged evidence establishes that Paco has created a successful streetwear apparel business (initially grossing an annual turnover in 2020 of $2.68 million to $17.24 million in 2024) with distinctive designs, stemming from collaborations with well-known local and international musicians and athletes sold by "one-off, limited edition releases" where they sell out, often within minutes of the online drop. The products are sold exclusively through Geedup's (the second applicant's) website. The applicants have taken technological steps to limit the ability of third parties to purchase and resell their genuine products online. The applicants became aware of counterfeit sales in 2023 and engaged investigators. The respondents' counterfeit goods, replicate the design of genuine Geedup products which, at the time of purchase, are no longer available for sale, replicate the swing tags but do not have the Certilogo authentication tags used by the genuine articles and are significantly inferior in quality and workmanship.
I am satisfied, by the admissions and on the evidence, that Paco's reputation has been diminished by the counterfeit selling, despite the respondents being commercial minnows. Paco's business markets on exclusive limited release drops, sold from one source. Whilst, the nature of the "serious attack" of the kind made by the competitor in Madden at [116], was of a different nature, I note that, ten years ago, the Full Court awarded the sum of $20,000. In all the circumstances, I consider an award in the amount of $20,000 for Paco's reputational loss is appropriate.

[63]

In addition, Paco seeks an award of $50,000 in additional damages for the trade mark infringement, pursuant to s 126(2) of the TM Act.
The Court must first decide whether additional damages should be awarded and if so, what those damages should be: Redbubble Ltd v Hells Angels Motorcycle Corporation (Australia) Pty Limited [2024] FCAFC 15; 303 FCR 100 at [132]. In determining whether additional damages should be awarded, the Court must consider each of the five matters prescribed in s 126(2), namely: (a) the flagrancy of the infringement, (b) the need to deter similar infringements of registered trade marks; (c) the conduct of the party that infringed the registered trade mark that occurred: (i) after the act constituting the infringement; or (ii) after that party was informed that it had allegedly infringed the registered trade mark; (d) any benefit shown to have accrued to that party because of the infringement; and (e) all other relevant matters.
In Truong Giang Corporation v Quach [2015] FCA 1097; 114 IPR 498, (at [133]-[140]), Justice Wigney helpfully assembled the relevant organising principles which inform the discretion_:_
1. First, it is not necessary that any amount of additional damages be proportionate to any award of compensatory damages: Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 2) [2008] FCA 746; (2008) 76 IPR 763 (Futuretronics) at [17].
2. Second, an award of additional damages involves an element of penalty: Facton Ltd v Rifai Fashions Pty Ltd [2012] FCAFC 9; (2012) 199 FCR 569 (Facton) at [33], [89].
3. Third, part of the function of an award of additional damages is to mark the Court's disapproval or opprobrium of the infringing conduct: Facton at [36].
4. Fourth, the matters set out in s 126(2)(a)-(d) of the TM Act are not preconditions to an award of additional damages: Futuretronics at [17].
5. Fifth, conduct which may properly be seen as flagrant includes conduct which involves a deliberate and calculated infringement, a calculated disregard of the applicant's rights, or a cynical pursuit of benefit: Futuretronics at [19]; Facton at [92].
6. Sixth, post-infringement conduct within s 126(2)(c) of the TM Act is unlikely to include the respondent's conduct of the infringement proceedings. Such conduct is more relevant to the appropriate order as to costs: Futuretronics at [17]; Flags 2000 Pty Ltd v Smith [2003] FCA 1067; (2003) 59 IPR 191 at [31]- [34]. That said, it is difficult to see why some aspects of the conduct, by a respondent, in defence of infringement proceedings, might not be relevant to the award of additional damages: cf. Facton at [44], [69]. Conduct of the proceedings which involved high-handedness, dishonesty, recalcitrance, or flagrant disregard of, or deficiencies in compliance with, discovery orders or notices to produce, might, at the very least, suggest a greater need for an award of additional damages that would deter future infringing conduct by the respondent.
7. Seventh, an award of additional damages can encompass damages which, at common law, would be aggravated or exemplary damages: Futuretronics at [17]. The matters specified in s 126(2) of the TM Act are of a kind which are taken into account in determining whether a party is entitled to aggravated or exemplary damages at common law, but in the end result the damages to be awarded are not aggravated or exemplary damages, but additional damages, being of a type sui generis: Facton at [33]-[36], [91].
8. In Halal Certification Authority Pty Ltd v Scadilone Pty Ltd [2014] FCA 614; (2014) 107 IPR 23 at [111], Perram J considered that if additional damages are appropriate, the damages to be awarded must operate as a sufficient deterrent to ensure that the conduct will not occur again.
Paco submitted that additional damages should be awarded first, by reference to the pleaded admissions as to liability. Secondly, reliance was placed on the basis that the deemed admissions in the pleading that the infringement was "flagrant" and in "complete disregard of Ella Secret's legal obligations". This was said to be supported by the hearsay evidence of the private investigators (in reports annexed to a solicitor affidavit) who made two trap purchases on two different occasions. The alleged flagrancy is said to have arisen because Mr Briman appeared to represent that the counterfeit goods were genuine when purportedly by the deemed admissions, he and his company are taken to have known that the goods were counterfeits.
As a consequence it was submitted that there was a need for both specific and general deterrence. Reliance was placed on the award of additional damages of $91,015 in Halal Certification Authority Pty Ltd v Scadilone Pty Ltd [2014] FCA 614; 107 IPR 23 and of $50,000 in Truong.
The determination of whether to award additional damages, in circumstances of default, is not without difficulty. Whilst there is no preclusion from doing so, the two main authorities relied upon where such damages were considered appropriate and awarded involved contested hearings arising from different circumstances.
An instructive recent survey of the circumstances in which awards of additional damages have been ordered by this Court, was undertaken by Justice Anderson in Rock Solid Industries International (Pty) Ltd v Ozi 4X4 Pty Ltd [2025] FCA 334 at [32]. The following list supplements that survey:

[64]

(a) Review Australia Pty Ltd v New Cover Group Pty Ltd [2008] FCA 1589; 79 IPR 236 at [58]-[62]: Justice Kenny made an award for additional damages for design infringement in the sum of $50,000 on the basis that the respondent failed to make proper discovery, and that the respondent failed to include evidence of the commercial benefit which it obtained;

(b) Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd [2009] FCA 633; 81 IPR 378 at [35]-[41]: Justice Gordon awarded additional damages in the sum of $150,000 in light of the flagrancy of infringement, the fact that the respondent continued to sell the infringing items after being put on notice of the applicant's copyright rights and the need to deter similar infringements;

(c) Seafolly Pty Limited v Fewstone Pty Ltd [2014] FCA 321; 313 ALR 41 at [621]-[643]: Justice Dodds-Streeton awarded $150,000 in additional damages, based on a number of factors including general deterrence, the benefit received by the infringing respondent and the fact that the respondent continued to sell the infringing garments after being put on notice of the applicant's copyright claim;

(d) Geneva Laboratories Limited v Prestige Premium Deals Pty Ltd (No 5) [2017] FCA 63; 122 IPR 279: Justice Bromwich awarded $212,500 for trade mark and copyright infringement and passing off;

(e) Vitaco Health IP v AFI Cosmetic Pty Ltd (No 3) [2024] FCA 598 at [97]-[113]: Justice Rofe made an award of additional damages for trade mark and copyright infringement in the sum of $250,000 on the basis that the respondents set up a sophisticated replica version of the applicant's website including copyright, trade marks and artistic works in order to mislead potential customers and divert them from the applicant's website and there was a need to deter further infringing conduct by the respondent or others; and

(f) Rock Solid: Justice Anderson awarded $200,000 by way of additional damages, by reason of the following: it was the second time that the applicant had brought proceedings against the respondent, the respondent was continuing to engage in the infringing conduct, the respondent had chosen not to engage in the proceedings, it was impossible to calculate its damages for lost sales, the respondent had accrued a substantial benefit from the infringing conduct and there was a strong need to deter the respondent and other traders generally engaging in similar conduct.

[65]

Account must be taken of the fact that the Court will award more than nominal damages: s 126(2)(e); Redbubble at [145]. In this case, the award of $20,000 is not insubstantial in the circumstances and represents that Paco has been compensated to some extent such that there is not a pressing need to provide additional damages, to compensate for what could not be awarded as nominal damages.
As to the first of the five prescribed matters to be taken into account under s 126(2), an admission to the adjectival description of the conduct in the pleading of being "fragrant" only goes so far as to there is admission as to the underlying facts which inform that descriptor. There is a clear necessity for pleading with precision. The pleaded conduct establishes, as the applicants conceded, that the respondents must be operating on a very small scale. There was evidence of two occasions when the counterfeit goods were being sold at a stall at Paddy's Markets in Flemington, by the respondents. Whilst, it is accepted that there is an admission as to an infringement, "since at least 25 August 2024" (SOC [11]), there is only evidence of infringement on one occasion thereafter, 8 September 2024.
An obvious purpose of the TM Act is to ensure that the sale of counterfeit goods does not occur, it is in a essence the most flagrant form of infringement. The Explanatory Memorandum to the Intellectual Property Laws Amendment (Raising the Bar) Bill 2011 (Cth) at page 113, concerning the inclusion of the discretion to award additional damages in the trade mark legislation, provided a strong indication that it was Parliament's intention, this discretionary award could be directed to counterfeiting circumstances, given many counterfeiters do not maintain sufficient business records to enable a satisfactory calculation of ordinary damages or an account of profits.
However, to establish the same, by default, requires keen attention be given to what is made out on the pleaded case. Here, the allegation was that the respondents promoted, offered for sale, sold and supplied clothing not manufactured by or with the licence of [the applicants] that incorporates or displays (including on labels and tags attached to the clothing) the Geedup Trade Marks or signs which are substantially identical with or deceptively similar to the Geedup Trade Marks. There was no pleaded allegation (said to be admitted) that they well knew that the counterfeit product was counterfeit and infringed Paco's mark. None of the hearsay evidence relied upon by the applicants proved the same. The extent to which the infringing conduct was said to be "flagrant" was by an admission, that Ella Secret's conduct was "with complete disregard of Ella Secret's legal obligations" (SOC [23(b)]). As adverted to above, "flagrancy" involves deliberate and calculated infringement with a calculated disregard of the owner's or authorised user's rights, or a cynical pursuit of benefit: Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 2) [2008] FCA 746; 76 IPR 763 at [19]; Facton Ltd v Rifai Fashions Pty Ltd [2012] FCAFC 9; 199 FCR 569 at [92]. I do not accept, on the pleaded case, that the allegation of flagrancy has been made out.
As to the second of the five prescribed matters, there was no pleaded basis to suggest that there was a specific need to deter similar infringements of registered trade marks (by the respondents) (s 126(2)(b)), save for the allegation, supportive of injunctive relief, that the respondents "will either continue to engage in the wrongful conduct ... or will engage in such conduct in the future" (SOC [21]). As to the need for general deterrence in this case, I accept a party is able to rely on further affidavit material in relation to the relief claimed: Australian Competition and Consumer Commission v Dateline.Net.Au Pty Ltd [2007] FCAFC 146; 161 FCR 513 at [50]; United Broadcasting International Pty Ltd v Turkplus Pty Ltd (No 2) [2010] FCA 1413 at [42]-[44]. In this case, there was some evidence of the need to deter other traders generally from engaging in similar conduct.
There is no pleaded allegation, admitted on default, that the respondents: (i) after the act constituting the infringement; or (ii) after the respondents were informed that they had allegedly infringed the registered trade mark (s 126(2)(c)), save for the generalised assertion that unless restrained, it is likely that the respondents will either continue to engage in like wrongful conduct. This imprecise pleading is insufficient to prove this factor.
Accordingly, whilst it can be inferred that the respondents have benefited from the infringement, the Court is not persuaded, on the applicants' pleaded case, that additional damages ought be awarded in this case.

Paco Nominees Pty Ltd v Ella Secret Australia Pty Ltd

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