Federal Court of Australia|1990-09-07|Before: Hill J

The applicant bring in short minutes of order to reflect the terms of this judgment on a date to be fixed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

The applicant, MIPS Computer Systems Inc, a United States corporation seeks interlocutory relief against the first respondent, MIPS Computer Resources Pty Limited, a New South Wales corporation, its shareholders and directors, Mr and Mrs Amjadi, the third and fourth respondents respectively and Mr Vakili, the second respondent. The applicant claims that the first respondent has, in trade or commerce, engaged in conduct that is misleading or deceptive or is likely to mislead or deceive in breach of of the (Cth) ("the Act"). In the alternative the applicant bases its proceedings in passing off. The claim against the individual respondents is grounded in s.75B of the Act.

2. The applicant has its corporate headquarters in Sunnyvale, California. According to the evidence before me its worldwide revenue for 1989 was US$101,862,000, of which US$8,082,000 represented revenue from the Pacific Rim, approximately 20 per cent thereof (US$1,468,829 in that year) was attributable to Australia. In the year to August 1990 the revenue for Australia was US$2,069,808 and the applicant expects the revenue for calendar year 1990 to be US$5,000,000.

3. The applicant is a leading supplier of Reduced Instruction Set Computer technology ("RISC") for the computer system and embedded control markets. It licenses its technology to customers for use in their own systems as well as selling outright computer systems products. Significant to the company's success is the emergence of the operating system UNIX as what is referred to in the evidence as an open, industry standard operating system which has gained significant acceptance in Australia. Since its inception, the applicant has focused, according to its evidence, which was not in dispute, on "developing a superior RISC computer architecture based on high performance microprocessors, powerful optimising compilers and its UNIX-based RISC/os operating system".

4. The applicant markets a "family" of computer systems, subsystems and board products based on its RISC architecture and its UNIX-based RISC/os operating system. The applicant's high performance computer systems range in list price from $15,000 to $350,000 depending on features and configuration options selected. "Subsystems" are apparently computer system products without storage peripherals. "Board products" generally consist of computer system CPU boards and memory boards. The applicant is registered as the proprietor of the trade mark "MIPS" in a large number of countries around the world in respect of computer products.

5. The customers of the applicant include manufacturers of equipment systems who sell to end-users under their own label, "value added resellers" who purchase system and subsystem products and integrate these with industry-specific application software, "system integrators" who purchase system and subsystem products and incorporate these into customer- specific systems and networks, distributors who purchase system products of the applicant and market them to other resellers, and end-users, predominantly universities and scientific or technical computing laboratories. The applicant's competitors in the market place include Data General Corporation, Hewlett-Packard Company, Sun Microsystems Inc, Unisys Corporation and IBM.

6. It is not in dispute that the applicant has a significant reputation in Australia and there was a great deal of evidence led by the applicant to demonstrate this. In August 1987 the applicant appointed Comperex Australia Pty Limited a non-exclusive Australian distributor of its products and the latter company first displayed the applicant's products in Australia at a UNIX trade show held in Sydney at the University of Technology in August 1987. The applicant or its products have been the subject of articles and reports in professional, trade and association journals or newspapers both in Australia and overseas including the publication "On $ Deck Magazine", a publication in which the first respondent also placed advertising.

7. The August 1987 UNIX Trade Show was attended by some 400 to 500 people and Comperex Australia Pty Limited distributed to potential customers pamphlets and other literature concerning the applicant and its products. At the same time there were press releases issued and an advertising program was commenced. Comperex Australia Pty Limited also, in the period September 1987 to date, held a number of seminars designed to increase the market's awareness of the applicant's products and technology. An exhibition of the applicant's products by Comperex Australia Pty Limited was held at Darling Harbour at the Comdex Exhibition in July 1988 at which approximately 2,000 people attended; a major display of the applicant's products at the Melbourne AUUG conference in September 1988 was attended by 1,000 people and a representative of the applicant was the keynote speaker. Comperex Australia Pty Limited has also conducted a number of direct mail campaigns to selected potential clients and customers.

8. On 21 September 1988 the applicant announced jointly with Digital Equipment Corporation ("DEC") a technology exchange agreement for RISC technology and designs. The arrangement was that DEC would purchase a minority interest in the applicant and would appoint a member of the board of the applicant. The announcement received wide publicity in Australia as well as in the United States.

9. Between June 1985 and October 1988 Mr Vakili or his family company, HVM Consultancy Pty Limited, was retained by a company, Computer Exchange Corporation Pty Limited, as a commission agent specialising in the sale of second-hand DEC equipment. Prior to 1985 it would seem that Mr Vakili was employed by DEC. Mr Vakili or one of his companies had employed Mr Amjadi to assist him in selling DEC equipment on behalf of Computer Exchange Corporation Pty Limited although for a short time from September 1988 until the end of October 1988 Mr Amjadi was employed by Computer Exchange Corporation Pty Limited directly when arrangements between that company, Mr Amjadi and Mr Vakili or his company came to an end. Prior to his work with or for Computer Exchange Corporation Pty Limited, Mr Amjadi had a number of years experience working as a computer programmer.

10. It is somewhat unclear who the dominant party in the decision to incorporate the first respondent was. Mr Amjadi in an affidavit filed in the proceedings deposed that prior to the incorporation of the first respondent a discussion had taken place between Mr Vakili and Mr Neghabian (no longer associated with the first respondent) and himself as to what name would be used for the company which they had presumably determined to incorporate. It is said that Mr Neghabian had suggested the name "MIPS Computer Resources Pty Limited", that Mr Vakili had expressed a liking for "Southern Cross Computers" and that Mr Amjadi had thought the name "Compumart" would be good. Eventually after a discussion which took between an hour and one and a half hours, the decision was made to use the name "MIPS Computer Resources Pty Limited". The application with the Corporate Affairs Commission was lodged on 31 October 1988 by Mr Vakili. It might be here mentioned that the initials M.I.P.S. are an acronym in common use in the computer industry in reference to the speed of computers and stand for "millions of instructions per second".

11. The Memorandum and Articles of Association of the first respondent were also lodged by Mr Vakili, the initial subscribers being Mr Neghabian, Mr Vakili and Mr Amjadi who were also to be the first directors. The first respondent was incorporated on 3 November 1988. By a minute signed by all the initial directors on 18 November 1988 it was "decided" that Mr Amjadi would on that day "take over all the shares" of the first respondent, "thus becoming sole shareholder". Thereupon both Mr Vakili and Mr Neghabian resigned as directors, Mrs Amjadi was appointed as director and the shares were transferred to Mr Amjadi and his wife for the costs of incorporation.

12. According to Mr Amjadi's evidence, the first respondent commenced trading from premises in Chippendale in December 1988 dealing mainly in used computer equipment although it also dealt in new equipment. As the business developed, it came to deal 97 per cent by value in refurbished second-hand computer equipment and about 3 per cent in new equipment. Mr Amjadi deposed that initially the computer equipment in which the first respondent traded was principally that produced by Data General, Unisys and Fujitsu. He said that until 16 January 1989 he alone managed the business of the first respondent but after that date when the first respondent moved to premises at 335 Mowbray Road Chatswood, he managed the first respondent in conjunction with Mr Vakili and no longer dealt in Unisys or Fujitsu equipment. According to Mr Amjadi the real starting date of the business was 1 February 1989.

13. For a time, until about August or September 1989 the first respondent sold equipment of the Apple Computer Company, although from January or February 1989 onwards the first respondent targeted equipment of DEC and the sale of that equipment was the mainstay of its business. The trade in Apple equipment lasted only a short time and was thereafter discontinued. Advertisements placed in the Sydney Morning Herald by the first respondent on 20 March 1989, 5 June 1989, 19 June 1989 and 26 June 1989 for the sale of Apple products did not refer to the name "MIPS Computer Resources" but instead "MCR" and a telephone number. In cross-examination, Mr Amjadi explained that the use of "MCR" rather than the full name of the first respondent was designed to save money.

14. So far as the evidence presently before the Court would indicate, the first respondent first advertised in respect of DEC products in March 1989. Advertisements appeared in On $ Deck Magazine and Pacific Computer Weekly. All advertising in respect of DEC equipment so placed displayed a logo with the initials "MCR" and the full name of the first respondent. The word "MIPS" appears in large print. The advertisements also emphasise the name "DEC".

15. In establishing the business of the first respondent Mr Amjadi and Mr Vakili relied in part on contacts they had made with DEC users and also Data General users but they purchased a couple of lists of names of DEC users which they used to canvas sales by telephone. A deliberate decision was made to target DEC users and it was Mr Vakili who was the manager of this part of the business which Mr Amjadi agreed was the "main stream earning source" of the applicant. The first respondent also promoted its business by sending advertising circulars; on the first occasion 1,000 were sent out and on the second occasion 4,000. Five batches of these circulars have so far been sent amounting in all to 16,000 circulars. As at 28 August 1990 a mailing was being undertaken although the evidence makes it unclear whether this is additional to, or included in, the 16,000 referred to above. Advertising in journals in respect of DEC equipment is still being placed.

16. After contact is made for the first time with a potential customer, a letter is sent to that customer on the letterhead of the respondent. This letterhead also contains the logo "MCR" and displays the word "MIPS" with some prominence. The shorter form letter states in part:

"MIPS Computer Resources has been formed

to provide hardware solution for your

computing requirements, we are also in an

excellent position to find a customer for your

surplus equipment. We are licence holders for

the export and import of computer equipment,

and have an extensive network of national and

international suppliers and customers.

Therefore, if you are looking to upgrade

your system, or are in the market for

peripherals, or are in urgent need of spare

parts, we are well placed to provide you with

guaranteed equipment at the shortest possible

time and with considerable savings.

All our equipment carries a manufacturer

maintenance letter (MAQ), which guarantees the

equipment to be eligible for maintenance by

the manufacturer.

Should you prefer to lease or rent your

equipment we can arrange competitive rates to

suit your budgetary requirements."

"MIPS Computer Resources has been set up

by a group of professionals, specializing in

design, supply and implementation of the

computer hardware requirement of the industry.

We, in MCR, have the combined experience

of over 40 years of computer industry, backing

up in our endeavor (sic) to satisfy our most

valued customers.

Our knowledge of the industry, combined

with our extensive experience can provide you

and your EDP department with:

* Substantial savings in your `DEC'

computer purchases.

* Much better return on your surplus

equipment.

* Shortest possible delivery time

* Reliable hardware (All our `DEC'

hardware is guarantied (sic) for `DEC'

maintenance.)

* A comprehensive after sales services

in conjunction with manufacturer field

service for the installation and

maintenance of the supplied equipments.

Therefore if you need to upgrade, to

expand your installation, or to sell your

surplus equipment, we are proud to offer you

our services."

The letter then lists major customers said to include:

"Department of Housing

CSR Limited

Consolidated Press

Electricity Commission

Western Mining"

18. The relationship between Mr Vakili and Mr Amjadi is, on the present state of the evidence, somewhat curious. Mr Vakili was overseas when the present proceedings were instituted, on business of the first respondent, and filed no affidavit in the proceedings. Although not apparently a director of the first respondent he is a signatory to the bank account. He (or his family company), is paid a regular commission calculated on a yearly basis. Every now and then, according to Mr Amjadi, they would sit down and calculate a break-up of the amount due to Mr Vakili. The net profits of the DEC business of the company are determined (including as outgoings commissions paid to other salesmen) and the profits are then divided 70 per cent to Mr Vakili and 30 per cent to Mr Amjadi.

19. This division of profits apparently brought about the result, according to what appears to be a draft profit and loss account for the 1990 financial year, of consultancy fees payable to HVM Consultancy Pty Limited of $239,585 (of which apparently $164,207 became payable in June of 1990). Consultancy fees payable to Mr Amjadi for the same year were $158,822 (of which apparently $96,571 became payable in June of 1990 to him). The first respondent as a result brought to account a net profit for the year in the draft accounts of $3,561. The draft balance sheet for the year showed the company with a bank balance of $4,203 (compared with a reconciled overdraft of $20,105 at the end of May 1990), with trade debtors of $379,679 and trade creditors of $343,831. These accounts showed as liabilities of the first respondent amounts owed to Mr Vakili and Mr Amjadi of $20,808 and $10,215 respectively. The whole amount payable to HVM Consultancy Pty Limited in the 1990 financial year was not, it would seem, paid in cash although the amount outstanding as at 30 June 1990 is unknown. Whether the outstanding amount payable to HVM Consultancy Pty Limited was included in the amount said in the draft accounts to be owed to Mr Vakili or whether it was omitted altogether from the draft accounts is unclear.

20. There are a number of unsatisfactory features of these accounts. One is that the first respondent either had no stock on hand at the beginning or end of the year or if it did the profit of the company was calculated without taking opening and closing stock into account. Assuming that there was, as Mr Amjadi suggested in oral evidence, $100,000 stock on hand at the end of the year it would seem probable that there was also stock on hand at the beginning of the year. It would therefore seem the accounts do not give a satisfactory picture of the profits or losses of the first respondent's business. No accounts at all were produced for the period to 30 June 1989 being the first year of trading although Notices to Produce accountancy records including such accounts were served.

21. The arrangement between Mr Amjadi or the first respondent and Mr Vakili was not, according to Mr Amjadi, the subject of any documented agreement but was purely oral. There seems, however, little doubt that Mr Vakili, at least so far as the DEC business is concerned, is of the greatest significance to the first respondent. It might be mentioned that Mr Vakili, according to Mr Amjadi, has a bachelor degree in electronic engineering and a masters degree in computer engineering and some 20 years experience in the computer industry. Mr Amjadi, by contrast has a bachelor of science degree from the University of Hawaii majoring in information and computer science.

22. According to Mr Amjadi, he was unaware of the existence of the applicant until March or April of 1989 when he read an article in which apparently the name of the applicant appeared in the "On $ Deck Magazine" published then. Although he had read parts of various computer publications in the time prior to then, he said he had not seen the applicant's name in them. There is no evidence presently before the Court from Mr Vakili so it is not known when he first became aware of the existence of the applicant.

23. On the state of the present evidence it is possible that, working as he was with DEC equipment, Mr Vakili could have heard of the arrangement between DEC and the applicant in September 1988, particularly as that arrangement received considerable publicity. The evidence suggests that news of the co-operative arrangement was disseminated to members of a computer group "DECUS" (Digital Equipment Corporation User Society) of which Mr Vakili was a member at or about the time of the announcement. It is however inappropriate at the present stage of proceedings to speculate on the state of Mr Vakili's knowledge.

24. It would seem that some time prior to 26 March 1990 the legal representatives of the applicant had "secured" the name "MIPS Computer Systems" in all States and Territories of Australia with the exception of New South Wales. The circumstances in which instructions so to do were given by the applicant do not appear in evidence although but for one matter it could readily be inferred that a decision had been made by the applicant to incorporate a wholly owned subsidiary under the name "MIPS Computer Systems Pty Limited" and register that company as a foreign company or as a recognised company in each State and Territory of Australia.

25. A difficulty with that inference lies in the fact that a company "MIPS Computer Systems Pty Limited" was in fact incorporated in Queensland on 24 February 1988 having as its shareholders a Californian individual and an Australian company which would appear to be a shelf company associated with a firm of solicitors in Queensland. The company was formed, it would seem, to carry on the business of selling computer software and hardware. The annual return made up to 30 June 1989 showed the company to be an exempt proprietary company and to have no holding company. From searches of the records of the Corporate Affairs Commission, that company in June 1989 notified the Corporate Affairs Commission that it no longer desired to have its name registered in the Australian Capital Territory, Northern Territory, South Australia, Tasmania, Victoria and Western Australia. It had apparently been unable to secure registration of its name in New South Wales because of the registration of a business name "MIPS Contracting" in New South Wales.

26. The relationship, if any, between the company "MIPS Computer Systems Pty Limited" and the applicant was never explained in evidence. It may well be that it came to be owned by the applicant at some time after June 1989 and that the instructions to secure the name "MIPS Computer Systems" in all States and Territories were in relation to having that company, which was still on the register in Queensland on 1 August 1990, recognised in other States and Territories. Alternatively it may be that the instructions related to the formation of a totally new company as a wholly owned subsidiary and its recognition in other States and Territories. The matter is of no present significance. What is of significance is that the inquiry made of the Corporate Affairs Commission in New South Wales on 26 March 1990 revealed that the name was unavailable having regard to the registration of the first respondent. The name was apparently available to the applicant in all other States and Territories of the Commonwealth.

27. The inability of the applicant to carry on business either under its own name or through a subsidiary affects, so the applicant says, its ability to expand in Australia. It plans to use in Australia additional distributors plus a large number of "value added resellers". It seems from the evidence adduced that intended distributors or value added resellers are reluctant to trade directly with an overseas company.

28. On or about 1 May 1990 there was forwarded to the applicant a letter dated 26 April 1990 from Beatrice Hincapie, a secretary with the first respondent. In that letter she complains that the first respondent gets a "lot of your mail and telephone calls". She referred to an average of two to three calls per day. In the letter Ms Hincapie requests a telephone number for the applicant so that calls could be redirected. It may be observed here that the first respondent is listed in the Sydney White Pages Telephone Directory but the applicant is not. This is not surprising since without registration as a foreign company or recognition in New South Wales listing in the telephone book would be virtually unobtainable. According to Mr Cowley, the Finance Director (Australia and New Zealand) of the applicant he then contacted Ms Hincapie by telephone on or about 2 May 1990. The telephone was answered as "MCR".

29. Subsequently on 4 May 1990 Mr Vakili telephoned Mr Cowley and introduced himself (according to Mr Cowley) as "a principal" of the first respondent. A conversation then took place as to the similarity of the two names.

30. On 10 May 1990 Mr Cowley again telephoned the first respondent and spoke to Mr Amjadi. The phone was again answered "MCR". In that call, which was made to arrange a later meeting, Mr Amjadi is said to have observed that Mr Vakili was "a partner".

31. On 11 May 1990 Mr Cowley went to the premises of the first respondent, a house in Chatswood. Since a previous occasion on which Mr Cowley had viewed the premises, a sign had been erected showing the full name of the first respondent. Mr Cowley spoke with Mr Vakili who indicated that a change of name of the first respondent would have an impact of a quarter's disturbance to the first respondent. Discussion as to possible compensation for the first respondent to change its name took place but negotiations were presumably not successful.

32. On 17 July 1990 Mr Amjadi telephoned Mr Cowley concerning a parcel from Federal Express mistakenly billed to the first respondent rather than to the applicant. There is some conflict in the evidence as to the precise terms of this conversation. According to Mr Cowley, Mr Amjadi said:

"We are receiving five or six calls a day

from people looking for you and we are giving

them your number. The frequency of confusion

is more and more."

"I have received a customs clearance

document from Federal Express. It was meant

for you. We are now getting more and more

frequently mail that is intended for you. We

may be damaged by that. If, for example, I

got something like this from Customs, I may

not realise it is meant for you and I might

pay for it and have the equipment delivered to

me. If they are computer boards I might sent

them to my customers by mistake and they could

make a mess of their computer equipment. This

could damage our business. The customer would

be very unhappy. I hope you are not receiving

our mail by mistake."

34. On 23 July 1990 the solicitor for the first respondent threatened legal action against the applicant and required that the applicant cease to use the first respondent's name. This precipitated a letter from the applicant's solicitors threatening injunction proceedings against the first respondent.

35. In the result, proceedings were commenced by the first respondent against the applicant by application filed on 6 August 1990 and separate proceedings were commenced by the applicant. It is the latter proceedings which are presently before me for interlocutory relief. The interlocutory relief sought included the following orders:

1. An order that the respondents be until further

order restrained from passing off any business as

that, or any goods as those, of the applicant;

2. An order that the respondents by themselves, their

servants and agents be until further order restrained

from carrying on a business or in any way trading

under or by use of a name which is identical with or

deceptively similar to the applicant's name;

3. An order that the respondents forthwith take steps

to pass a resolution to change the name of the company

"MIPS Computer Resources Pty Limited" to a name which

is not identical with or deceptively similar to the

name of the applicant, and to lodge such resolution at

the office of the Corporate Affairs Commission

together with all necessary applications and

documentation to change that company's name;

4. An order that the first respondent within seven

days of the making of this order cause a letter to be

sent on its normal letterhead to each of the persons

or companies listed in -

(a) exhibit "SA 1" in the affidavit of Shahin

Amjadi sworn 23 August 1990; and

(b) exhibit "SA 3" in the affidavit of Shahin

Amjadi sworn 28 August 1990

in form of the schedule.

SCHEDULE

Draft letter:

"MIPS Computer Resources Pty Limited advises that it

does not have nor has it ever had any connection or

relationship with MIPS Computer Systems Inc.

MIPS Computer Resources Pty Limited wishes to make it

clear that its activities as a broker of second-hand

and new computer equipment are not authorised by nor a

part of the business activities of MIPS Computer Systems Inc."

36. The proper tests to be applied in determining whether to grant interlocutory relief are not in dispute. They are set out in the decision of the Full Court of this Court in Epitoma Pty Ltd v Australasian Meat Industry Employees' Union and Ors (No 2) [1984] FCA 202; (1984) 54 ALR 730, 734 by reference to the decision of the High Court in Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 46 ALR 398 and Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 52 ALR 651. The Court is required to consider whether there is a serious issue to be tried and to determine whether the balance of convenience lies in favour of granting or refusing the interlocutory relief sought pending a final hearing. These two matters are not, as have often been observed, mutually exclusive matters. Rather they are interrelated; they are both part of the same process by which the Court seeks to do justice as between the parties pending the final resolution of the dispute between them: cf Northrop J in The News Corporation Ltd v First Pacific News Corporation Pty Ltd (1989) ATPR 40978 at 50683.

37. The applicant's case does not ultimately depend upon whether the decision to incorporate the first respondent under the name "MIPS Computer Resources Pty Limited" was arrived at with knowledge of the existence of the applicant and of its activities and reputation in Australia although no doubt a finding of fact to that effect would make the applicant's case for injunctive relief a very strong one indeed. The misleading conduct in trade or commerce or the conduct likely to mislead in the present case is either the trading by the first respondent under a name which is misleading or likely to mislead or continuing so to do after notice of the existence of the applicant and its reputation in Australia.

38. There is a real issue, which cannot be resolved in the present state of the proceedings, whether from the very inception of the plans to incorporate the first respondent and to cause it to trade, the individual respondents were aware of the existence of the applicant and its reputation and activities in Australia. As I have already indicated, this is denied by Mr Amjadi. Mr Vakili gave no evidence in the proceedings and his failure so to do was explained by his absence from Australia on business. Whether it might have been possible for an affidavit to have been prepared for and sworn by Mr Vakili while he was overseas is not a matter upon which I wish to speculate. I draw no inference from his failure so to do.

39. There are some objective facts which might found a conclusion that Mr Vakili was so aware and these coupled with the question of the role which Mr Vakili played in the company and the manner in which the decision to use the name "MIPS Computer Resources" was arrived at will no doubt be matters which, if the case proceeds to a final hearing, will require exploration. It would be improper at this stage of the proceedings to comment further on this aspect of the case.

40. What is however admitted by Mr Amjadi and is not in dispute is that he (and it may be therefore presumed Mr Vakili) were fully aware of the existence of the applicant in March or April 1989 when Mr Amjadi read an article about the applicant in the "On $ Deck Magazine". Notwithstanding, the first respondent continued to trade under the name "MIPS Computer Resources".

41. Not only did the first respondent continue to trade but its advertising in respect of DEC products (its only profitable business) commenced only in March 1989. The applicant placed emphasis upon the fact that the advertisements prior to March 1989 for Apple equipment did not use the name "MIPS Computer Resources" at all but only the initials "MCR". This was said to be significant because the name "MIPS Computer Resources" had no significance to Apple users but it was significant for DEC users having regard to the connection between DEC and the applicant formed in September 1988. The suggestion by Mr Amjadi that use of the full name was eschewed on financial grounds was argued to be unsatisfactory.

42. It is true that it is possible to infer from this pattern of advertising that the name "MIPS Computer Resources" was of little or no significance when dealing with customers interested in Apple computers but of great significance when dealing with DEC customers. I would, however, at the present stage of the proceedings not be prepared to infer that the decision to advertise using the name "MIPS Computer Resources" was consciously made having regard to the applicant's reputation and connection with DEC equipment. Whether the applicant's submission to this effect can be made good is a matter to be explored at the ultimate hearing.

43. More important however is the continuation of trading by the first respondent after notice of the existence and reputation of the applicant. In this connection it should be noted that in an action for damages for passing off, fraud in the sense necessary to support an action in deceit need not be shown. It is sufficient to show that there has been persistence after notice; cf BM Auto Sales Pty Ltd v Budget Rent A Car System Pty Ltd (1976) 12 ALR 363 per Gibbs J citing at 370 Turner v General Motors (Australia) Pty Ltd [1929] HCA 22; (1929) 42 CLR 352. In Cochrane v MacNish (1896) AC 225 at 230, 231 cited by Isaacs J in Turner (supra) at 362, Lord Morris speaking for the Judicial Committee said:

"The respondents erred, unwittingly at

first. But as they persisted in their error

after their attention was called to the fact

that they were infringing the appellant's

rights their conduct in the eye of the law

amounts to fraud, and they must be held

responsible for the consequences."

44. In the context of the Act, conduct engaged upon may be misleading or capable of being misleading even if engaged upon honestly and unintentionally. All that is relevant is whether the conduct was such as to lead into error or be likely so to do: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1981-82) 149 CLR 191 at 197-198 per Gibbs C.J.; Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd [1984] FCA 180; (1984) 2 FCR 82 at 88. It may in my view, however, be of relevance in considering the grant of interlocutory relief that the conduct, if it be otherwise misleading or likely to mislead, be persisted in after notice.

45. In Equity Access Pty Ltd v Westpac Banking Corporation and Westpac Savings Bank Ltd and Anor (1990) ATPR 40994 I set out in summary form the principles to be applied in a case under s.52 of the Act. In so doing I observed that the scope for operation of s.52 was broader than that involved in the tort of passing off and that while the principles applicable to a case pleaded in passing off were not irrelevant, s.52 was not to be confined by reference to the prior hearing on passing off but was confined only by the very words of the section themselves. Thus in most cases, and the present would seem one, failure to succeed under s.52 would invariably mean that proceedings for passing off would likewise fail.

46. The proposition which I discussed in Equity Access (supra) need not be here repeated. Suffice it to say that the misrepresentation necessary to be shown to establish a breach of s.52 is, in the present case alleged to be a misrepresentation that the first respondent is either an arm of the applicant or related in business to the applicant. If the result of that alleged misrepresentation is mere confusion or uncertainty in the sense of causing wonderment at whether the connection exists, the conduct will not necessarily be in breach of the section: Parkdale v Puxu (supra) at 198.

47. On the other hand, it is not necessary to adduce evidence that persons are in fact misled or deceived. The question whether conduct is misleading or deceptive or likely to mislead or deceive will be an objective question for the Court to determine for itself.

48. Before me, a considerable body of evidence was adduced by the applicant from persons in the computer industry who had attempted to contact the applicant and had instead contacted the first respondent only to be told that there was no connection between the companies. That evidence showed only confusion which was ultimately put to rest by the first respondent and does not advance the applicant's case. However, since actual deception need not be shown, it is necessary that I consider whether a reasonably significant number of potential purchasers would be likely to be misled or deceived: Weitmann v Katies Ltd (1977) 29 FLR 336 at 343.

49. Accepting for the present that the applicant and the first respondent operate in the same market or field of activity (a matter to which a submission was directed), it seems to me self evident that the substantial similarity of the name of each company renders it highly probable that customers dealing with the first respondent will be misled or deceived into believing that the first respondent is but an arm of the applicant or associated in business with it. The evidence that a substantial number of calls each week are received by the first respondent although intended for the applicant merely points up the likelihood of customers being misled.

50. The relevant section of the public by which the question should be tested (cf Taco Company of Australia Inc v Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177 at 202-203) are those persons who are potential customers of the first respondent and the applicant including those to whom the first respondent's brochures and advertising are directed. The use of the word "Resources" in the name of the first respondent does not operate to differentiate the two classes of customers as was the case in Equity Access (supra) with the use of the name of the relevant bank. Rather, as was submitted by the applicant, the word implies a support facility or back-up service which merely reinforces the potentiality for deception. This is particularly so when the form letter to customers set out earlier is considered.

51. For the respondents it was, however, argued that the applicant and the first respondent operated in different markets so that there was no likelihood of deception, notwithstanding the similarity of the names. It was accepted that the applicant was, as its evidence revealed, at the "cutting edge of high technology" in the development of new computers, boards, chips and computer architecture. The first respondent, on the other hand, operates as a broker predominantly buying and selling second-hand computer equipment. This submission may only be another way of saying that the customers of each party were different.

52. Reference was made to the decisions of the Full Court of this Court in McWilliams Wines Pty Ltd v McDonald's System of Australia Pty Ltd [1980] FCA 159; (1980) 33 ALR 394 and Chase Manhattan Overseas Corporation v Chase Corporation Ltd (1986) 12 FCR 375 in both of which cases injunctive relief was denied. In the former it was held that use of the mark "Big Mac" in reference to the appellant's wines was not misleading or deceptive conduct within s.52(1) of the Act having regard to the use by the respondent of the same mark in relation to hamburgers for it did not, on the facts of the case, indicate a business connection between the appellant and the respondent. Such confusion as there might have been resulted from erroneous assumptions made by customers and not from the conduct of the appellant. The different character of the goods played some part in the decision; cf per Northrop J at 411.

53. In Chase (supra) the appellants conducted the business of banking and the provision of financial services and the respondent was a real estate and investment company. It was held by the majority of the Court (Lockhart and Neaves JJ, Beaumont J dissenting) that there was very little common field of activity although there was, in the view of Lockhart J, a real possibility of overlap between their respective business activities so as to cause confusion. Nevertheless the conduct did not infringe s.52. Neaves J expressed the view at 381 that it was not "an irrelevant consideration" to have regard to any overlap or potential overlap in business activities. His Honour was of the view that on the evidence, future activities of the respondent would not be considered a natural extension of the Australian business of the appellants (at 381).

54. Beaumont J, who dissented in the result, indicated as well that regard could be had to "the closeness or otherwise of the respective fields of activity in which the appellants and the ...respondent are in business". His Honour said at 392:

"The parties were thus engaged in allied

or related, if not the same, fields. `Where

the defendant's activities, although not in an

area of business in which the plaintiff is

engaged, are in an area of business which

might be assumed to be a natural extension of

the plaintiff's business, likelihood of

deception will readily be inferred': see

Halsbury, op cit, p 116; see also Dunlop

Pneumatic Tyre Co Ltd v Dunlop Lubricant Co

(supra); Ames Crosta Ltd v Pionex

International Ltd (1977) FSR 46 at 48;

Totalizator Agency Board v Turf News Pty Ltd

[1967] VicRp 68; (1967) VR 605 at 608; Abundant Earth Pty Ltd

v R and C Products Pty Ltd (1985) 7 FCR 233 at

238-239; cf Morison, `Unfair Competition and

`Passing-Off'' (1956) 2 Syd Law Rev 50 at 61;

Phillips and Coleman, `Passing off and the

`Common Field of Activity'' (1985) 101 LQR 242

at 256."

55. It would seem that the difference between the views of Beaumont J and that of the majority went more to a slightly different view of the facts taken by his Honour than to any significant point of principle affecting the present debate.

56. Both the applicant and the first respondent are in the present case, engaged in activities of selling computers. It is true that the applicant is engaged in what might be called the top end of the computer market in sales of new computers or components for those computers whereas the first respondent is more concerned with the bottom end of the market (i.e. the second-hand market). However, even on the first respondent's own evidence, there is overlap since the first respondent makes some sales of new computer equipment.

57. It may be accepted at the present stage of proceedings that products of the applicant have not yet filtered down to the second-hand market but that is not conclusive of the issue. Given the substantial involvement of the applicant with DEC computer equipment, and the fact that virtually the whole of the first respondent's profitable business lies in sales of DEC equipment, it seems to me to be unreal in the present case to submit that there is such a different field of activity between the two parties that there is no likelihood of deception or of potential customers being misled. The present is not a case where potential customers may merely be caused to wonder at a connection between the two businesses. Both companies are closely associated with DEC equipment, the applicant through its widely publicised technology exchange agreement and the first respondent by engaging in the sale of that equipment. Use in these circumstances by the first respondent of a name substantially similar to that of the applicant renders the likelihood of customers purchasing DEC equipment new or second-hand or upgrading existing equipment being misled or deceived very high indeed. It matters not in my opinion that the two companies are not in fact direct competitors.

58. The remedy sought by the applicant is essentially twofold. First, what was described in argument as the traditional remedy of injunctive relief in effect restraining the first respondent from carrying on business under the name "MIPS Computer Resources" or any other name in which the word "MIPS" appeared. Second, the applicant sought a mandatory injunction, described in argument as "unusual relief" in effect requiring the first respondent to surrender the name "MIPS Computer Resources" to permit the applicant's subsidiary to be registered in New South Wales under the name "MIPS Computer Systems Inc". Authority for the appropriateness of the grant of a mandatory injunction of the type sought is to be found in the decision of Powell J in Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd (1981) 1 NSWLR 196.

59. Fletcher Challenge (supra) was also a case where the relief sought was interlocutory. The case was a strong one for relief which normally would be regarded as final relief (at least in the absence of some undertaking on the part of the plaintiff) cf at 202. The defendant was a shelf company and had not traded; the relevant name was adopted by the defendant virtually concurrently with an announcement to which considerable publicity attached of an amalgamation of companies and the formation of a holding company with the name "Fletcher Challenge Ltd". The defendant could show no real disadvantage if injunctive relief based there on passing off was granted.

60. A mandatory injunction to change a name was also granted on an interlocutory basis by Wilcox J in Aerospatiale Societe Nationale Industrielle v Aerospatiale Helicopters Pty Ltd (1986) ATPR 40700 but again in circumstances where the respondent had not traded. As Wilcox J said in that case at 47647:

"It is not usual to grant, by way of

interlocutory relief, a mandatory injunction

but such a course is within power. Section

80(1) empowers the grant of an injunction `in

such terms as the Court determines to be

appropriate'. Whether a mandatory injunction

should be granted depends upon the

circumstances of, and the balance of

convenience in, the particular case."

61. There is some discussion in the judgment of Gummow J in Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 as to whether there is a need, before granting a mandatory injunction, for the court to reach a high degree of assurance that at the trial it will appear the injunction was rightly granted. His Honour, and with respect I agree, rejected such an approach in favour of the view that the power to grant mandatory injunctions, like prohibitory injunctions, must be exercised with caution but that the circumstances in which relief will be granted are a matter of judicial discretion in each case.

62. The present case clearly emphasises why the mere form of the injunction cannot require a separate formulation of the test to be applied. In practical effect the grant of the prohibitory injunction will in the present case have the same effect as the grant of a mandatory injunction requiring a change of name subject to the undertaking of the applicant to, as it were, return the name should the first respondent be successful at the final hearing. Unless the first respondent ceases business altogether until the final hearing, it will be compelled, whatever form of relief be granted, to change its name. It should here be mentioned that the applicant has reserved a number of names using the initials "MCR" and is prepared to make any of these available to the first respondent if it is required to change its name so as to minimise the disruption to the first respondent in its business, the name "MCR" having some connection with the first respondent through its logo and through the way the telephone is sometimes answered.

63. Nevertheless, it is clear that where a respondent in a case such as the present has established some reputation in the name the use of which is to be prohibited if injunctive relief be granted, the balance of convenience will be of much greater significance than it was in Fletcher Challenge (supra) or Aerospatiale (supra). Likewise, the possibility of injustice to the first respondent should it turn out at the trial that interlocutory relief should not have been granted will in the present case be greater than in the two cases cited.

64. From the point of view of the applicant, failure to grant interlocutory relief will have the consequences that it will be unable to secure registration in New South Wales of its subsidiary or itself carry on business in the State and will probably be unable, at least satisfactorily, to develop its business with the "value added resellers". It is probable that it would suffer loss in the period prior to final hearing although the loss could clearly not be quantified. There must also be some doubt whether the first respondent has sufficient assets to meet any, or at least any substantial, award of damages.

65. As I have already indicated, the only balance sheet produced in evidence was a draft balance sheet and absence of reference to trading stock and probably to the outstanding loan account from Mr Vakili's family company casts doubt upon its accuracy. Taking the balance sheet as at 30 June 1990 at face value, if all trade debts were realised, the first respondent has a surplus of assets over liabilities of $7,041. Further, if virtually all its net profits are paid out in the form of commissions to Mr Amjadi and HVM Consultancy Pty Limited, there is little chance that the first respondent could improve its situation between now and the date of any trial even if its sales in the period increased considerably.

66. From the point of view of the first respondent, it is not disputed that the applicant could meet any obligation it might have under the normal undertaking as to damages which it has proffered. There is a difficulty which is inherent in cases such as the present in quantifying those damages and particularly in determining what sales if any the first respondent might lose in the event it changed its name. I have taken this into account in reaching my conclusion.

67. The evidence of the applicant suggested that the business of a computer broker was very much a personal one and this was to a large extent supported by the cross-examination of Mr Amjadi. It seems that a substantial way in which custom is obtained for computer sales by the first respondent is by calling up prospective customers whose names have been obtained either by personal knowledge or from lists. Purchases of computers are largely made from other brokers overseas. It is not suggested that the first respondent's name is significant in purchasing computers.

68. In his oral evidence, Mr Amjadi said that in the period of trading up to 30 June 1989 the first respondent had spent some $33,395 in promotion being $9,944 for advertising, $544 for postage, $4,763 for printing and stationery and $18,144 for telephone. These figures are obviously inflated to some extent in that telephone calls would include international calls to brokers to purchase stock as well as calls to customers which establish personal contact rather than dwelt on the name. Nevertheless the amount in question gives some guide to the cost of establishment. (According to Mr Amjadi between 60 per cent and 70 per cent of telephone calls in this initial period related to promotion as against negotiation for actual sales).

69. In the full year of trading ending 30 June 1990 advertising was $17,175, postage $8,398, printing $7,970, stationery $5,454 and according to Mr Amjadi, of the telephone charges for the year ($47,697), 20 to 50 per cent related to promotion. He established that in the financial year 1991 if trading continued these figures would increase by at least 40 to 50 per cent. He expressed the view that business would be lost if the first respondent was required to change its name. Asked to estimate the loss, he expressed the view that there could be a loss of sales (not profit) of between $500,000 to $1,000,000 over a period of twelve months. This estimate is in conflict with the figure of three months sales suggested by Mr Vakili to Mr Cowley to which I have earlier referred and suggests perhaps an unconscious inflating of the figure to advance the case of the first respondent.

70. I take into account that the first respondent has by now established a business which appears to be increasing and is not insubstantial. Mr Amjadi in his evidence spoke of estimates of sales of $2,000,000 for the fiscal year 1991. How many customers would be necessary to account for these sales was not a matter much explored in the evidence. However from a confidential document in which the names of substantial customers were set out and estimates of the business done with those customers since incorporation were also set out, it would seem that ten customers accounted for a minimum of $1,165,000 and a maximum of $1,200,000 sales. The total number of names on the document (which represented what were said to be the substantial customers of the first respondent) was 15. This evidence would not lead to the conclusion that the first respondent has an extensive client base which it would have to contact in the event that relief were granted.

71. The first respondent submitted that given the virtual final nature of the remedy where in whatever form relief were granted the effect is to require the first respondent to change its name, the Court should only grant interlocutory relief if the case were such that there was no defence to the allegations of passing off or breach of s.52 on the part of the first respondent. While this puts the test too high in favour of the respondents, I am conscious that the potential consequences of the remedy should it turn out that relief should not have been granted are damaging to the first respondent but as against this I must also balance the following:

* The evidence clearly establishes that the name "MIPS

Computer Systems" has developed a secondary meaning

associated with the applicant, notwithstanding the

origin of M.I.P.S. as an acronym.

* The potentiality for customers to be misled by the

continuing use of the name "MIPS Computer Resources"

by the first respondent is very great.

* There is an arguable issue to be tried as to whether

the name was selected by the first respondent

deliberately and with knowledge of the reputation and

activities of the applicant.

* The first respondent had knowledge of the existence of

the applicant before significant amounts were spent

advertising the name. It thereafter persisted in

targeting DEC clients knowing of the applicant's

connection with DEC.

* The first respondent has continued to advertise

notwithstanding the institution of the present

proceedings and proposes to continue so to do.

* As the above matters show, the case for the applicant

on liability is a quite strong one.

* The applicant is a substantial concern able to meet

any liability that may arise under the undertaking as

to damages. The first respondent would probably not

be able to meet any award in damages finally made, so

far as the evidence presently stands.

* The applicant is likely to suffer damage if injunctive

relief is not granted and its business plans are

stultified pending hearing which damage as suggested

above may not be able to be met by the first

respondent. There is no evidence available as to the

net assets of the individual respondents.

72. Subject to a discretionary matter raised by the first respondent I would therefore propose to grant interlocutory relief to the applicant.

73. It was submitted for the first respondent that on the best view of the evidence of the applicant, the applicant must have known of the existence of the first respondent by May/June 1989 yet in excess of a year had passed without proceedings being commenced. The factual basis for this conclusion was the fact that an article concerning the applicant appeared in a publication in which the first respondent also advertised in May or June 1989. It was said that the evidence made clear that the applicant had maintained a clipping service and so would have seen the advertisement of the first respondent. Further, the evidence made it clear that the non-exclusive agent of the applicant, Comperex Australia Pty Limited knew of the existence of the first respondent soon after that company commenced trading.

74. The classic statement of the law as to laches is contained in the judgment of Lord Blackburn in Erlanger and Ors v The New Sombrero Phosphate Company and Ors (1878) 3 App Cas 1218 at 1279 referred to with approval by Gibbs J in the Budget case (supra) at 372. His Lordship quoting Lindsay Petroleum Company v Hurd Law Rep 5 PC 239 said:

"`The doctrine of laches in Courts of

Equity is not an arbitrary or a technical

doctrine. Where it would be practically

unjust to give a remedy, either because the

party has, by his conduct done that which

might fairly be regarded as equivalent to a

waiver of it, or where, by his conduct and

neglect he has, though perhaps not waiving

that remedy, yet put the other party in a

situation in which it would not be reasonable

to place him if the remedy were afterwards to

be asserted, in either of these cases lapse of

time and delay are most material. But in

every case if an argument against relief,

which otherwise would be just, is founded upon

mere delay, that delay of course not amounting

to a bar by any statute of limitations, the

validity of that defence must be tried upon

principles substantially equitable. Two

circumstances always important in such cases

are the length of the delay and the nature of

the acts done during the interval, which might

affect either party and cause a balance of

justice or injustice in taking the one course

or the other, so far as relates to the remedy.'"

"I have looked in vain for any authority

which gives a more distinct and definite rule

than this; and I think, from the nature of

the inquiry, it must always be a question of

more or less, depending on the degree of

diligence which might reasonably be required,

and the degree of change which has occurred,

whether the balance of justice or injustice is

in favour of granting the remedy or

withholding it. The determination of such a

question must largely depend on the turn of

mind of those who have to decide, ..."

76. There is nothing in the evidence that suggests that the applicant did in fact know of the existence of the first respondent as is suggested. But even if it did there is nothing to suggest that the applicant assented to the use of the name or that the respondents were misled into supposing that their activities were permitted: cf per Gibbs J in Budget (supra) at 371. Further, just as in Budget (supra), so here, the case is not one in which a defendant ignorant of the existence of another company continued to use its name and build up a business.

77. There is another significant criticism that may be made in the present case of this submission of the respondents. Section 52, unlike the remedy for passing off, is not concerned with private rights and in particular the protection of the reputation of a trader. It is part of a law designed to ensure proper trade practices. Its focus is on preventing consumers being misled by conduct which is proscribed. The public interest will be of greater concern in a case under s.52 than might otherwise be thought to be the case in private proceedings in tort (but cf per Murphy J in Budget at 373).

78. Such delay as there was should not, in my opinion, mitigate against the grant of injunctive relief in the present circumstances. In any event the evidence does not justify a conclusion that the applicant knew of the existence of the first respondent until approximately March 1990.

79. The evidence of the applicant was that enquiries of the Corporate Affairs Commission had revealed that the only impediment to the registration of a company in New South Wales under the name of MIPS Computer Systems Pty Limited was the existence of the first respondent as a company incorporated in the State. However enquiries made by the respondents had revealed the existence of a registered business name "MIPS Contracting", a business unrelated to the parties to the present dispute the proprietor of which is said to carry on the business of computer programming at Roseville. The existence of this name had in December 1987 been apparently an impediment to the registration of the company MIPS Computer System Pty Limited in New South Wales. That business name was apparently no impediment to the incorporation of the first respondent in 1988.

80. The Court would be slow to grant a mandatory injunction to compel the first respondent to change its name if so to do would be of no advantage to the applicant and would not facilitate use by the applicant of the name "MIPS Computer Systems" in New South Wales.

81. For these reasons I would propose to grant an interim injunction until further order restraining the first respondent from carrying on business under the name "MIPS Computer Resources Pty Limited" or any name in which the word "MIPS" appeared and to order that the first respondent consent to the use by a wholly owned subsidiary of the applicant of the name "MIPS Computer Systems Pty Limited" in New South Wales. If the registration of that name in New South Wales proceeds then I would order the first respondent to change its name so that the word "MIPS" no longer appears in it. I do so having regard not only to the ordinary undertaking as to damages which is given by the applicant but also to the additional undertakings of the applicant as contained in the application in the following terms:

(a) In the event that it is ultimately

unsuccessful in the present proceedings

it will pay all costs incurred by the

respondents in or in connection with the

change of name ordered to be effected; and

(a) In the event that it is ultimately

unsuccessful in the proceedings, it will

do all such acts and things and execute

all such documents as may be necessary

or desirable to be done or executed

in order to enable the respondent MIPS

Computer Resources Pty Limited to assume

once more its present registered name.

82. These undertakings mirror those accepted by Powell J. in Fletcher Challenge. I would be prepared further to grant an injunction restraining the first respondent from using the word "MIPS" in advertising although not, of course where used to indicate the speed of a computer. I would also order a letter to be sent within an appropriate time from the date of order being made (perhaps seven days is an appropriate time) in the form sought by the applicant to which I have already referred. I direct the applicant to bring in short minutes of order to reflect the terms of this judgment and I will adjourn the proceedings until a date to be agreed with counsel to settle the form of orders. I will hear argument as to costs.

Re Mips Computer Systems Inc v Mips Computer Resources Pty Limited; Hassan Vakili; Shahin Amjadi and Nazanin Amjadi [1990] FCA 348; 18 IPR 577 (7 September 1990)

Re Mips Computer Systems Inc v Mips Computer Resources Pty Limited; Hassan Vakili; Shahin Amjadi and Nazanin Amjadi [1990] FCA 348; 18 IPR 577

At a glance

Court

Decision date

Before

Source

Judgment (95 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (14)

Re Mips Computer Systems Inc v Mips Computer Resources Pty Limited; Hassan Vakili; Shahin Amjadi and Nazanin Amjadi [1990] FCA 348; 18 IPR 577 (7 September 1990)