Sony Computer Entertainment Australia Pty Ltd v Stirling

1 On 15 June 2001, for the reasons that I then delivered, I made orders in favour of the applicants declaring that the respondent had infringed registered trade marks and restraining the respondent from further infringement. Other orders were also made requiring the respondent to furnish sworn information concerning infringements of the trade marks prior to that time. Affidavits have been filed on behalf of the respondent in purported compliance with the orders that I made. For the most part, the affidavits contain assertions that the respondent kept no record of, and has no recollection of, the quantum of sales of compact disks for use in connection with Sony Play Station consoles. 2 The matter was fixed for hearing today for the purposes of assessing the applicants' claims for damages. There has been no appearance by the respondent. However, I am satisfied from the affidavit evidence that is before me today that, by letter of 19 November 2001, the respondent was informed of the hearing fixed for today. That letter was delivered by courier to the address of the respondent in Croydon, Victoria. Notwithstanding the absence of the respondent, I have embarked on the hearing of applicants' claims for damages. 3 The evidence before me indicates that there have been several communications between the respondent, on the one hand, and various agents of the applicants, on the other, concerning the activities of the respondent. On 23 September 1999, the respondent said that she had about 400 titles of Play Station games. On 24 September 1999, Mr Wayne Gladman, an investigator, observed in the respondent's home, approximately twenty compact disks in plastic cases. The inference that I would draw from the evidence is that those compact disks were unauthorised copies bearing the applicants' trade marks. In other words, they were counterfeit copies. 4 On 6 December 1999, the applicants' solicitors wrote to the solicitors then acting for the respondent. In that letter, the solicitors indicated that they were instructed that an agent of the applicants had observed in excess 300 Play Station disks at the respondent's premises. The letter also referred to a list of Play Station games that was furnished to the investigator by the respondent in September 1999. That list contains over 400 titles of Play Station games. 5 In response to letters from the applicants' solicitors, the solicitors then acting for the respondent indicated that, as at 21 March 2000, the respondent believed that she had sold between 50 and 100 Play Station games but that no records were kept of the names and purchasers of the games. 6 Mr Nicholas Andrew Foster is the Director of Finance and Administration and company secretary of the first applicant. In an affidavit sworn on 31 May 2001, Mr Foster said that in the year ended 31 March 1999 a total of 1,307,067 Play Station games were distributed in Australia by the first applicant. In the year ended 31 March 2000 a total of 1,308,317 Play Station games were distributed in Australia by the first applicant. Mr Foster also said in that affidavit that he believed that, on a very conservative estimate, counterfeit copies of Play Station games being sold in Australia constituted about 10 per cent of the retail dollar value of all games for the Play Station console sold in Australia. Mr Foster also gave oral evidence concerning his estimate of the profit margin derived by the applicants in connection with the sale of Play Station games. I have made an order that that evidence not be disclosed to any person other than the lawyers acting for the applicants. 7 If a court finds damage has occurred as a result of wrongful conduct that gives rise to a cause of action, it must do its best to quantify the loss, even if a degree of speculation and guesswork is involved. If actual damage is suffered, the award must be for more than nominal damages - see Enzed Holdings Limited & Others v Wynthea Pty Limited & Ors (1984) 3 IPR 619 at 637. In such a case the Court is, in effect, doing what is required of a jury when it may have to form conclusions on matters on slender material and to make allowances for contingencies, even to the extent of guesswork or speculation. Uncertainty in the quantification of damage, even in the cases of contracts, does not prevent an assessment, provided that some broad estimate can be made. 8 I am satisfied from the evidence before me that some damage has been suffered by the applicants. That damage consists of the loss of sales that might otherwise have been made by the applicants. The quantification of the loss involves considerable speculation and guesswork. The evidence indicates that the respondent was selling games for $15 each, whereas the recommended retail price for genuine games is between $45 and $50. It will be a matter of guesswork as to the extent to which, if the respondent had not sold games, buyers would have spent money on buying the applicants' games. I am satisfied that a substantial part of the money that was paid to the respondent for the purchase of the counterfeit games would have been spent in buying genuine Sony games. It is not appropriate to place a figure on the proportion, other than to say that it is a substantial part. 9 I am also satisfied that there would be some damage to the applicants by reason of counterfeit games being made available for sale. The respondent offered games for sale by advertisements in the Trading Post newspaper. Sales took place by people calling at a private home. In the circumstances, I do not consider that purchasers of the counterfeit games would reasonably have believed that the games were genuine Sony products. I would draw the inference that, generally, a buyer would be satisfied that, in order to obtain a genuine Sony game, one would need to buy it through ordinary channels. 10 Nevertheless, the fact that Sony games are available in the circumstances in which the respondent was selling them tends to devalue the product that the applicants offer for sale. Ten per cent of the sale value is a very substantial proportion. It is very difficult to place any figure on the loss that would have been suffered by Sony by way of additional devaluation of its products by reason of the conduct of the respondent. 11 Given Mr Foster's estimate of the proportion of counterfeit disks in the market, I would conclude that the loss occasioned by the respondent would be very small. Nevertheless, it would not be nominal. In the circumstances, I consider that it is appropriate to order the respondent to pay damages to the applicants. Relying to some extent on guesswork, I consider that an appropriate measure of the applicants' damages is $3000. 12 As I have already indicated, the respondent was not present on the hearing of the applicants' claims for damages. It is therefore appropriate that I direct the applicants to draw the respondent's attention to the provisions of Order 35 Rule 7(2)(a), which provide that the Court may set aside a judgment or order after the order has been entered where it has been made in the absence of a party, whether or not the absent party is in default of appearance or otherwise in default, and whether or not the absent party had notice of the motion for the order. As I have said, I am satisfied that the respondent did have notice. 13 The final matter that needs to be addressed is the question that arises under Order 62 Rule 36A(1). That rule provides as follows: "Where a party is awarded judgment for less than $100,000 on a claim … for a money sum or damages, any costs ordered to be paid, including disbursements, will be reduced by one third of the amount otherwise allowable under [Order 62], unless the Court or a Judge otherwise orders." 14 Rule 36A(2) provides: "If the Court or a Judge is of the opinion that a proceeding … brought in [the Federal Court] could [have] more suitably have been brought in another court, and so declares, then any costs to be paid will be reduced by one third of the amount otherwise allowable under [Order 62]." 15 The amount of damages that I propose to order is well below $100,000. However, as I have indicated, the principal relief sought in these proceedings was injunctive relief. The applicants have been successful in their claims for injunctive relief. Having regard to the technicalities that are involved in the Trade Marks Act 1995, it is appropriate that claims for infringement of trade marks be brought in the Federal Court. The Federal Court has experience and expertise in dealing with matters involving intellectual property generally and trade mark infringement in particular. 16 It may be that another court, with greater limitations on jurisdiction and awards of damages, could have entertained this application. However, I consider that it was appropriate that the proceeding be brought in the Federal Court. Having regard to the principal claims for relief, I am satisfied that it is appropriate to order that any costs that I order the respondent to pay not be reduced pursuant to Order 62 Rule 36A. I certify that the sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.