Permanent Promotions Pty Ltd v Independent Distillers

REASONS FOR JUDGMENT 1 The applicant is the registered proprietor of design number 154585 (the Design) registered under the Designs Act 1906 (Cth) (the Act) in respect of "container with seal". The priority date is 11 August 2003. The statement of monopoly claimed pursuant to s 20(4) of the act is in the following terms: "Monopoly is claimed in the features of shape and/or configuration as applied to a container with seal as shown in the accompanying representation. In construing the monopoly claim, the shape and/or configuration of the container below the line AA is disregarded." The certificate includes four photographs as follows - 2 3 4 The applicant seeks an interlocutory injunction to restrain the respondent selling or offering for sale an allegedly infringing product. The respondent has already, on 1 June 2004, commenced proceeding number V687 of 2004 in this Court attacking the validity of the applicant's registration. 5 The applicant has applied the Design to what is described as a twisted shot glass with seal which I shall refer to as "the glass", a convenient term notwithstanding that it and the respondent's product are made of plastic. The glass is used for the consumption of spirits and liqueurs. It is about 6.5 cm high and about 3.5 cm in diameter at the base, flaring to 4.5 cm at the top. 6 Within the glass there is a twisting divider in the form of a helix. The divider itself tapers towards the top. There is a foil seal across the top which makes contact with the top of the divider. Thus the glass with seal forms two waterproof compartments. When each is filled with a liquid of a different colour, a distinctive barber's pole effect is achieved. The seal is removed by grasping a tab which extends about 1.25 cm out from the rim. 7 The applicant sells its glass to an unrelated company called Bacchus Distilleries Pty Ltd (Bacchus) which markets various combinations of liqueurs in the glass under the names "Cowboy" and "qf". In addition to providing the glasses, the applicant also fills them with the liqueurs supplied by Bacchus. 8 The respondent is a member of a large New Zealand group. It is about to launch on the Australian market a product under the name "Vodka Twistee" in a glass which is also a twisted shot glass with seal. Subject to some more detailed comments which appear later, the respondent's glass is similar in size, construction and general appearance to the applicant's glass. 9 I have to consider whether the applicant has raised a serious issue to be tried on infringement and, if so, whether the balance of convenience favours the grant of an injunction. 10 I am satisfied there is a serious issue to be tried. Because the balance of convenience is largely resolutive of the present application, I shall not embark on a comprehensive review of the detailed submissions advanced on behalf of both parties. However, I make the following observations. 11 Validity of the design is attacked primarily on the ground of novelty (see s 17 of the Act). Linked with that argument is the claim that the true author, within the meaning of s 19, is a Mr Glenn Irving, who created the piece of prior art chiefly relied on as an anticipation. 12 A design will possess the requisite novelty vis ŕ vis prior art if it has "sufficient individuality of appearance" to distinguish it from "the fundamental form of the article". The question is one of fact and impression: Malleys Ltd v JW Tomlin Pty Ltd (1961) 35 ALJR 352, D Sebel and Co Ltd v National Art Metal Co Pty Ltd (1965) 10 FLR 224 at 226. 13 Mr Irving had, prior to the priority date, produced a design for a glass with a twisted divider. That design is registered with a priority date of 23 December 1999. The divider did not extend to the top of the glass and there was no seal. There is evidence, however, of Mr Irving meeting with Mr Gavin Yates, a manufacturer of foil caps for jams and like products on the Central Coast of New South Wales, and with Mr Damien Hajdinjak of Bacchus. The Yates meeting was "some time in the first four months of 2003", and with Mr Hajdinjak there were three meetings in May 2003. 14 Mr Irving claimed that at the meetings with these two gentlemen he produced sketches of a twisted glass with a seal. Mr Yates supports this account but Mr Hajdinjak flatly denies that any sketches were produced at all. Senior counsel for the applicant made some valid criticisms of the respondent's evidence in this regard, but plainly there is a triable issue. The other pieces of prior art relied on by the respondents did not seem to me to get very close to the Design. 15 There may be more force in the respondent's reliance on an order which Bacchus sent to the applicant on 3 June 2003 for 1 million units of a twisted shot glass, which seems likely to have been an application of the Design. The order was accepted by the applicant on 4 June 2003. Notwithstanding the confidential nature of the discussions at the time between the applicant and Bacchus, this may constitute prior use for the purposes of s 17(1): Re Baker v Priem's Application (No 2) (1989) 15 IPR 660 at 666, and the analogous position in relation to patents discussed in Re Wheatley's Patent Application (1984) 2 IPR 450, and Azuko Pty Ltd v Old Digger Pty Ltd (2001) 52 IPR 75 at [110] et seq. 16 As to infringement, the test is one of visual comparison in which first impressions are important: Foggin v Lacey [2003] FCAFC 147, Wanem Pty Ltd v John Tekiela (1990) 19 IPR 435 at 408-409. Certainly at first impression I thought the similarly between the rival glasses was quite striking. However, it needs to be kept in mind that this is not a case of passing-off or misleading and deceptive conduct; nor is it a case involving a patent for a twisted shot glass with a seal. The monopoly claimed is quite limited, and in particular is limited to that which is above the line AA. 17 The respondents tendered a cardboard carton containing two dozen of the glasses, this being, I infer, the way in which the product arrives at retailers. The glasses and the carton arguably do not present a marked ridge across the seal or a crimped circumference, both of which are features of the photographs in the certificate of registration. Nevertheless, particularly as this is a matter turning on impression, I find there is a serious issue to be tried on infringement. 18 Turning to the balance of convenience, it now appears that the substantive trial can be heard by Lander J in Melbourne for five days, commencing on 9 August 2004. Accordingly, we are looking at a proposed restraint for a relatively short period. Other things being equal, the shorter the period to trial, the less willing a court should be to grant an interlocutory injunction, which is always a significant interference with what a party might otherwise be entitled to do. 19 The applicant's case is that its glass is the "cornerstone" of its business and "is critical to its future success". But for the threatened intervention of the respondent, the glass would have comprised 70 per cent of its business. Since August 2003 the applicant has invested $800,000 in purpose-built tooling, machinery and facilities for production of the glass. As already mentioned, the applicant sells its glass to Bacchus. The applicant fears that sales by Bacchus will be diminished as a result of the respondent's allegedly infringing product entering the market. In a confidential exhibit, a witness from the applicant provided the following details (figures have been deleted): "Permanent Promotions' sales to date of twisted seal, twisted glass product, are approximately $ Permanent Promotions' anticipated sales in the financial year ending 30 June 2005 are approximately $ If ID launches the respondent's product in Australia, Permanent Productions could lose up to per cent of those anticipated sales. 20 No figures for the profits on anticipated sales have been given. Moreover, given the short period to trial and the fact that no sales of the respondent's products have occurred until now, the loss pending trial would be no more than 20 per cent of the annual figure. These estimate of loss of sales is no more than a generalised assertion, with no explanation or argument in support. 21 Bearing in mind again the short period to trial, which of course is the only period relevant for present purposes, the observation can be made that the applicant has been in business since 1983 and has managed to survive the vicissitudes of business life in Australia since then. Although the twisted shot glass is a new and thus far very successful product, I am not persuaded that the entry of a rival product on the market for a few months will have the catastrophic effect forecast by the applicant. 22 The respondent's case is that it began promotion of its Vodka Twistee product in Australia in late April 2004, having launched it in the United Kingdom in the previous month. The respondent's product is manufactured in the United Kingdom. The first container with 1189 cases has now arrived in Melbourne and would have been released had it not been for an undertaking given to Ryan J on 11 June 2004. Shiploads are scheduled to arrive on 21, 25 and 28 June, and 1 and 12 July, and regularly thereafter. Forecast sales are as follows: June - 4870, July - 6040, August - 5260, September - 7280, October - 8460, November - 10,040. 23 The respondent makes the whole product itself, apart from the glass and seal. Thus its loss of profit would be on the whole product, amounting to $78 per case. Of the whole selling price, only about 10 per cent is attributable to the glass container. The lost profit on the product arriving by late July 2004 would be more than $1.1 million, and losses will continue at $429,000 per month based on average sales of 5000 $500 cases per month. 24 This leads me to a critical element of the balance of convenience issue. The applicant candidly informed the Court that "its ability to proffer the requisite undertaking as to damages is limited" and that if the matter proceeded to trial "in the ordinary way" it is unlikely that it could meet its obligations under an undertaking. The applicant's balance sheet for the year ended 30 June 2003 was tendered as a confidential exhibit. The net assets disclosed are modest. The applicant requested, therefore, a final trial as a matter of urgency. Although in the course of argument the parties were informed of the trial date, the applicant maintained its claim for an interlocutory injunction. 25 The respondent, in its written submissions, urged that should an injunction be granted, any undertaking should be backed by one or more directors of the applicant: Select Personnel Pty Ltd v Morgan and Banks Pty Ltd (1988) 12 IPR 167, cited with approval by the Full Court of this Court in First Netcom Pty Ltd v Telstra Corporation Ltd (2000) 101 FCR 77 at [23] - [24]. 26 I also drew this question to the attention of senior counsel for the applicant during the course of argument. However, no such personal undertaking has been forthcoming. Thus, as senior counsel for the respondent put it, sales restrained by any interlocutory injunction are likely to be lost forever, in the sense that profits lost would not be recoverable from the applicant should it fail in the proceeding. Relevant also to the financial position of the applicant is the fact that a trial between the parties in New Zealand has been set down for 23 August 2004, with an estimate of five weeks. The applicant has obtained interlocutory relief in New Zealand but has had to lodge a NZ$100,000 bond as security. 27 To the extent that the product sold by Bacchus, and packaged in the applicant's glass, suffers from competition with the respondent's product, it is likely that such competition would be affected by a host of factors that have nothing to do with the applicant's intellectual property in the Design. Price, marketing, consumer preference for liqueurs or vodka products are but examples. Moreover the Bacchus product has a head start in the market, and it is not self-evident that it will suffer serious damage from the respondent's product over the short time which would be covered by any injunction. 28 It was submitted that the respondent has deliberately and with "eyes wide open" chosen to enter the Australian market and run the risk of an infringement action, and that this should weigh heavily against it. I do not accept this. Where a firm has a genuine belief on reasonable grounds that a rival's intellectual property is invalid or that a rival's product may be contested with a non-infringing product, there is no reason why that firm should not enter the rival's market. Especially is that so when, as in the present case, the firm takes prompt legal action to challenge the validity of the rival's intellectual property. Of course, the firm may be met with a successful injunction application and/or may fail at trial, but the bare fact of knowledge of the rival's product is not to the point. 29 The applicant referred to the size and financial strength of the respondent. The group of which the respondent is a member employs 440 people worldwide and has an annual turnover of NZ$467 million. It is New Zealand's largest privately owned and operated liquor company. It has over 400 products in its portfolio. I do not see these as relevant points. Size and commercial success do not in themselves provide reasons for restricting what would otherwise be legal rights. 30 I conclude therefore that the balance of convenience weighs against the grant of an interlocutory injunction. The loss suffered by the applicant pending a trial is speculative and, insofar as it can be quantified on the evidence at the moment, not great in absolute terms. There is no risk of such loss being not recoverable from the respondent if the applicant succeeds at trial. On the other hand, the respondent would suffer substantial loss, with little prospect of recovery, if it succeeds. 31 The application for an interlocutory injunction will be dismissed, with costs. The trial of the substantive proceeding will be fixed for 9 August 2004 in Melbourne, before Lander J, together with proceeding V 687 of 2004. The parties should approach his Honour's staff to arrange appropriate directions. I certify that the preceding thirty one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.