Polo/Lauren Company L.P. v Ziliani Holdings Pty Ltd - [2008] FCAFC 195 - FCAFC 2008 case summary — Zoe

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Polo/Lauren Company L.P. v Ziliani Holdings Pty Ltd

[2008] FCAFC 195

Federal Court of Australia (Full Court)|2008-12-18|Before: Black CJ, Perram JJ

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Source facts

Court

Federal Court of Australia (Full Court)

Decision date

2008-12-18

Before

Black CJ, Perram JJ

Source

Original judgment source is linked above.

Judgment (89 paragraphs)

[1]

Introduction 1 The first respondent, Ziliani Holdings Pty Limited, imported into Australia from the United States of America, for the purpose of sale, genuine Polo Ralph Lauren garments. Most, but not all, bore the well-known polo player logo which is a representation of a polo player swinging a mallet whilst astride a cantering polo pony ("the Logo"). Mr Ziliani, who is the principal behind Ziliani Holdings Pty Limited, acquired the garments at various trade fairs in the United States of America where, apparently, last season's fashions may be purchased at a substantial discount: The Polo/Lauren Co LP v Ziliani Holdings Pty Ltd (2008) 75 IPR 143 at 146 [18]. It is convenient to refer to Mr Ziliani and his company together as "Ziliani". 2 Ziliani presently sells the garments from a store in Chatswood in Sydney, trading under the name of "Brands 4 Less". At times he has operated two such stores. It will be seen that Ziliani is an arbitrageur exploiting price differences in geographically diverse markets. 3 The appellant, whom we shall call Polo/Lauren, is a limited partnership under the laws of the State of New York. It is in the world-wide business of, inter alia, the distribution of Polo Ralph Lauren merchandise. The existence of Ziliani's business of selling discount, but genuine, Polo Ralph Lauren garments vexes it. These proceedings concern its efforts to prevent Ziliani from selling such garments from its store in Chatswood. The learned primary judge rejected these attempts. In our opinion, he was correct to do so. 4 Polo/Lauren's efforts to restrain Ziliani centre on the copyright in the Logo. The figure which comprises the Logo is an artistic work and was conceived by an Italian, Signor Athos Dell Torre, in 1971. Through various hands Polo/Lauren has become the present owner of the copyright in the Logo. 5 The importation into Australia of genuine goods bearing a trade mark legitimately affixed overseas is not an infringement of the local trade mark. Polo/Lauren could not, therefore, claim against Ziliani that by importing the garments into Australia that its trade mark had been infringed: see s 123(1) of the Trade Marks Act 1995 (Cth), and at an earlier time, Champagne Heidsieck et Cie Monopole Societe Anonyme v Buxton [1930] 1 Ch 330. 6 However, the importation into Australia of a copyright work without the permission of the copyright owner is, in certain circumstances of actual or imputed knowledge, an infringement of that copyright: see ss 37 and 38 of the Copyright Act 1968 (Cth)("the Act"). This kind of infringement is frequently referred to as "secondary infringement". It is by those means that Polo/Lauren seeks to restrain Ziliani from conducting its business.

[16]

Second Question - The distinction between the label and the labelled 16 Polo/Lauren submitted that the words "in relation to" where appearing in the definition of "accessory" in s 10(1) of the Act meant that the label referred to in subsections (a) and (c) of that definition necessarily connoted an association between the label and the article labelled which maintained the conceptual distinction between them. That interpretation was supported, so it was said, by the use in subsection (a) of the words "affixed to", "displayed on", "incorporated into" and "accompanying". Polo/Lauren was careful to disclaim any suggestion that the label had to be physically separate from the article with which it was associated for, as Ziliani correctly submitted, that would be inconsistent with the words "incorporated into the surface". What was required, therefore, was not physical but rather conceptual distinctiveness. Physical distinctiveness might be observed between, for example, a bottle of perfume and the fragrance contained therein or between a bottle of liquor and the label appearing on the bottle. Conceptual distinctiveness was more elusive but, whatever its boundaries might be, it was not present where a logo was an essential part of the article upon which it appeared. Mr Burley SC, in his careful and succinct argument, submitted that the Logo was so integral and essential to the clothing in question that neither meaningfully maintained its identity without the other. As Mr Burley put it, a Polo shirt without the Logo is just not a Polo shirt. 17 Mr Cobden SC submitted that this approach to the word "label" paid too little attention to the words "incorporated into the surface of" the article. There was, so he submitted, no escaping from the fact that the Logo was "incorporated into the surface of" the garments. Of course Ziliani accepted, and Polo/Lauren submitted, that not everything which was incorporated into the surface of an article became thereby a label. It could not follow, therefore, that just because the Logo was incorporated into the surface of the garments in question that it was a label.

[17]

Consideration 18 In his poem "Among School Children", William Butler Yeats asked "how can we know the dancer from the dance?" It seems to us that Mr Burley's argument that a label cannot be consubstantial with the article to which it is affixed raises the same point, albeit somewhat more prosaically. There is no doubt, we think, that the definition of "accessory" exhibits in its language an assumption that whatever else is comprehended by the expression "label" that notion is distinct, albeit not necessarily in a physical sense, from the article with which it is associated. So much is plain from the use of expressions such as "affixed to", "displayed on" and "incorporated into the surface of". Further, that view is consistent with the mischief at which the introduction of s 44C was directed. That mischief was the decision of Young J in R & A Bailey & Co Ltd v Boccaccio Pty Ltd & Ors (1986) 4 NSWLR 701. In that case, the defendants were vendors in Australia of imported bottles of Baileys Original Irish Cream upon which were affixed labels in which copyright subsisted. The local owner of that copyright sued to prevent the importation of the bottles on the ground that it was a secondary infringement of its copyright. Young J upheld this contention. 19 Two years later the Copyright Law Review Committee published its report "The Importation Provisions of the Copyright Act 1968". The Committee noted the Bailey case at p 28, [25]. It went on to say at pp 224-226, [181]-[183]: 181. The Committee is strongly of opinion that distributors of goods should not be able to control the market for their products by resorting to the subterfuge of devising a label or a package in which copyright will subsist. The purpose of copyright is to protect articles which are truly copyright articles such as books, sound recordings or films. This purpose is achieved by conferring on authors of works and makers of subject matter a bundle of exclusive rights entitling them to restrain conduct antipathetical to their incorporeal property and to sue for damages where such conduct has already been committed. If the simple expedient of affixing or attaching a label in which copyright subsists to any goods at all entitles the owner of the goods to exclude others from marketing similar goods, the sooner the practice is stopped the better it will be. However imaginatively labelled or packaged a bottle of liquor may be, the product is liquor. The same may be said of cigarettes, perfume and cosmetics. In the Committee's opinion it would be quite wrong to allow the present position to continue. Abuses which may occur can be remedied by resort to causes of action for passing-off, for breaches of s. 52 of the Trade Practices Act or for infringements of the Trade Marks Act1955. If the Trade Marks Act requires amendment to confer adequate protection, that is a matter for consideration in a different form of inquiry.

[29]

See also Mahoney JA in Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd & Ors (1991) 25 NSWLR 541 at 560. 25 The present case provides a good example of this difficulty. The Court has been referred to several definitions of "label" and, unsurprisingly, from this selection counsel for each of the parties has been able to find a definition supporting their opposing arguments. 26 Polo/Lauren argued that these definitions required that a label had to have a function that usually, but not invariably, was one of identification. Polo/Lauren submitted that "[a]s a matter of language the label will have the characteristic of conveying instructions or details concerning the ownership, use or nature of the item." The Logo could not, so it was submitted, have that characteristic since it was primarily decorative. Further, Polo/Lauren submitted that the learned primary judge (Polo/Lauren 75 IPR 143 at 159 [60]) erred when focusing on the "practical effect" of the Logo. It was submitted that the Logo could only have the practical effect of identifying the garments as being associated with Polo/Lauren if a consumer knew that the Logo connoted a connection with Polo/Lauren. Without such knowledge, the Logo was merely a rider on a horse with a stick, symbolising nothing. Polo/Lauren posited that whether something was a label or not could not depend on the states of mind of consumers. Such a focus, it was said, was more apposite to the tort of passing off and proceedings under the Trade Practices Act 1974 (Cth). 27 We do not accept that the Logo is purely decorative. It also has a function. The primary judge found (Polo/Lauren 75 IPR 143 at 154 [39]) that "the [Logo] has considerable significance in identifying clothing as emanating from the Ralph Lauren group". Subject to the trade mark issue, which we will consider below, it is clear that the Logo, which also may be accepted as decorative, at least served the function of identifying those clothes with Polo/Lauren. 28 In our view, a functional test reflects the natural and ordinary meaning of the word "label" as it appears in the Act. The character of an object can be determined by its evident function and such is the case with a label. A label can have many functions - such as conveying information about the size of a garment, washing instructions or origin. At the most basic level, a label performs an "identifying" function. In the context of the Act, we would read "label" as including something that in fact identifies an object. The assessment of function is objective. It does not depend upon the putative labeller's intention or the understanding of consumers. That is not to say that these considerations will be irrelevant; rather they are factors that may very well be taken into account in determining whether something performs the function necessary for its characterisation as a label. 29 The Logo is conceptually distinct from clothing on which it is embroidered and it identifies clothing as "emanating from the Ralph Lauren group". We think it highly improbable that this identification is accidental or unintentional, but whatever the intention, the primary judge found the Logo in fact identifies a connection with Polo/Lauren. This functional element is sufficient to make it clear that the Logo is a label for the purpose of Act.

[31]

31 In our view, the word "label" as it is used in the Act is intended to connote something physical, although as we have said, a label need not be physically distinct from the object labelled. A trade mark, of course, is an intangible property right; for this reason, we do not think "label" in the statutory context simply means "trade mark" in the statutory sense. Nonetheless, where a trade mark is physically manifested and incorporated into an article, as the Logo is here, the trade mark is being used to identify the article with its source. Its purpose is to label the goods; it is a label. 32 Trade marks cannot be used to prevent the importation of goods where the mark has been applied to the goods with the consent of the registered owner: see s 123(1) of the Trade Marks Act 1995 (Cth). The Copyright Act 1968 (Cth) is concerned only with labels in which copyright subsists. But where, as in the present case, there is copyright in a trade mark, and the trade mark is physically manifested and incorporated into an article so as to identify the article as that of the putative labeller, the copyright work is being used as a label. That was the situation in the Bailey case. This is the difficulty that Polo/Lauren cannot escape. 33 Further, if the concept of a "label" had excluded from it anything that was a trade mark this would mean that a trade mark could be used to control the importation of goods where copyright subsisted in it, but not otherwise. It is difficult to identify the attractive features of such a state of affairs, still harder to discern a principled underpinning for it. The Copyright Law Review Committee expressly contemplated in its suggested amendments that trade marks would be covered by the labelling exemption. It is true that its proposed legislation was not ultimately enacted but it serves nevertheless as recognition that the mischief aimed at included that kind of use of trade marks. Indeed, the label in the Bailey case, in which copyright inhered, was also a trade mark, a difficulty that the current argument overlooks. 34 There are other problems too. Although its terms are presently inapplicable, s 198A of the Act assumes a relationship between trade marks and copyright which tells against, rather than speaks for, the notion that copyright might be used to control the importation of goods so long as the copyright work forms part of a trade mark. Section 198A provides: 198A Non-infringement of trade mark in relation to the importation of copyright material

[56]

39 Polo/Lauren submitted that the defences available under Division 8 of Part III have no application to ss 37 and 38 because those sections are expressed to be "[s]ubject to Division 3". Polo/Lauren also submitted that s 77(2) of the Act only provides a defence to an actual reproduction in Australia, and is not concerned with, and is inapplicable to, the importation into Australia of products made by or on behalf of the copyright owner. Ziliani submitted that the emphasised words in ss 37 and 38 required the posing of a question about whether a hypothetical act of manufacture would have been an infringement of the copyright. It would be absurd, so it argued, to answer that question solely by reference to Division 3. 40 Ziliani's submissions are to be preferred. Sections 37 and 38 both require asking whether a hypothetical manufacture was an infringement. As Lehane J noted in Raben Footwear Pty Ltd v Polygram Records Inc & Anor (1997) 75 FCR 88 at 106, the words "if the importer knew, or ought reasonably to have known, that the making of the article would, if the article had been made in Australia by the importer, have constituted an infringement of the copyright": … are to be read as, in effect, deeming the actual importation to have been a making in Australia (such a making might have constituted an infringement, whereas but for [ss 37 and 38] an importation would not) so that the circumstances, knowledge of which is relevant, are, or at least include, those of the deemed making (actual importation). 41 As ss 37 and 38 "deem" the importation or subsequent dealing of the article to be the actual making of the article, all defences that are applicable to primary infringement (ie infringement under s 36 of the Act) such as those contained in Division 8 are necessarily available. Polo/Lauren's submissions would require the existence of that infringement to be gauged solely by reference to Division 3. But ss 37 and 38 do not use the expression "subject only to Division 3". Those words would be necessary to ensure that the sections operated as Polo/Lauren contends. Without the word "only" it becomes a question of construing ss 37 and 38, on the one hand, and Division 8 of Part III on the other, in a way which is consistent. We see no reason why the concept of infringement in ss 37 and 38 should be construed as if the rest of the Act outside of Division 3 of Part III did not exist. It does not appear to say that and there is no obvious reason why it should be so construed. 42 The argument should be rejected for another reason too: the italicised portions (above at [38]) were present before the words "[s]ubject to Division 3" were inserted. On Polo/Lauren's view, the italicised words must have changed their meaning when those amendments were made, an outcome which we find impossible to embrace. It follows that the words "[s]ubject to Division 3" should not be seen as qualifying the word "infringement" in ss 37(1) and 38(1). In our opinion, the defences disclosed in Division 8 are available as matters going to the knowledge requirements of ss 37 and 38.

[77]

50 It went on to say at [17.7]: The distinction between two and three dimensions. The right to copyright and design protection for an article need not be linked to whether it has two or three dimensions. However designs applied to the surface of products usually have an aesthetic purpose, while designs applied as the shape of products usually have an industrial purpose. The dimensional criterion is also said to be objective and reasonably certain. The 'rough justice' of the distinction has largely achieved the policy objective of s 74-77. The widely accepted policy is that artistic works that have been applied as three-dimensional designs should generally be denied copyright. It is also accepted that artistic works that have been commercially exploited in basically two-dimensional form should continue to receive copyright protection as artistic works. The Commission supports the policy underlying s 74-77 and the level of that protection. However the amendments effected by s 74-77 have proved uncertain in operation and need simplification and legal clarification. The CLRC will also examine the effect of the amendments in the course of its copyright inquiry. 51 That understanding was consistent with established views as to the operation of designs legislation. Thus in Howe M, Russell-Clarke and Howe on Industrial Designs (7th ed, Sweet & Maxwell Ltd, 2005) the learned authors were able to say (at p 76): Thus a design must consist either of a shape which is in three dimensions, or of a pattern which is in two dimensions, and that shape or pattern must be applied to an article or articles. An article can quite well exist without any pattern upon it, whereas it can have no existence at all apart from its shape or configuration. Thus, where the design is for a shape, it is really applied to the article by being incorporated into it, rather than applied to it in the literal sense of the word. As Lindley L.J. put it in Re Clarke's Registered Design [(1896) 13 R.P.C. 351 at 359]:

Polo/Lauren Company L.P. v Ziliani Holdings Pty Ltd

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