19 July, 2012
Spruson

Facton Ltd v Toast Sales Group Pty Ltd [2012] FCA 612 (19 June 2012) Middleton, J

Facton Ltd v Toast Sales Group Pty Ltd [2012] FCA 612 (19 June 2012) Middleton, J

Facts:

The Applicants ("G-Star") are a group of companies that collectively own and exploit the trade mark G-STAR globally. The trade mark G-STAR and the G-STAR Logo, in which copyright subsists, is widely registered in Australia for fashion related goods in Classes 3, 9, 14, 18, 25.

The Respondent (“Toast Sales”) conducts "pop-up" sales at various locations where it sells a range of brands of clothing and accessories including clothing branded G-STAR.

Toast Sales purchased goods bearing the trade mark G-STAR from three different sources

  • Denim Enterprises, the operator of authorized G-STAR retail outlets in Australia;
  • Bagga Menswear, a UK retailer that went into liquidation; and
  • Attr@ttivo, a Greek company, that had entered into a contract with the G-Star to only sub-distribute to retailers approved by G-Star.

G-Star had not approved the sale by Attr@ttivo of clothing bearing the trade mark G-STAR to Toast Sales.

Toast Sales used representations of the trade marks G-STAR and G-STAR Logo to promote its pop-up sales.

Sec 123 Trade Marks Act 1995 provides that it is not infringement of a registered trade mark to use the trade mark on goods or services if the trade mark was applied to the goods or services with the consent of the registered owner.

G-Star claimed that Toast Sales had infringed its registrations for the trade mark G-STAR, and copyright in the G-STAR Logo, in promotional material for the pop-up sales. G-Star also claimed that Toast Sales infringed the trade mark G-STAR by the sale of goods it purchased from Attr@ttivo and had engaged in misleading or deceptive conduct.

Issues:

  1. whether Toast Sales used the G-Star Trade Marks "as trade marks" for retail services in promotional material;
  2. if Toast Sales infringed the G-Star trade marks, whether Sec 123 provides a defence to infringement;
  3. whether an account of profits should be ordered in respect of any trade mark and copyright infringement; and
  4. whether the use of the G-Star trade marks by Toast Sales in promotional material was misleading or deceptive, likely to mislead or deceive, or a false representation prohibited by Sections 18 and 29 of the Australian Consumer Law.

Decision:

  1. Toast Sales had not used the G-Star trade marks "as trade mark" in relation to retailing services.
  2. The Sec 123 defence was available to Toast Sales as G-Star consented to the application of its trade mark to the goods sold by Toast Sales. The fact that the Greek company, Attr@ttivo, had breached its agreement with G-Star in selling G-Star goods to Toast Sales was not grounds for withdrawal of that consent.
  3. The award of an account of profits is discretionary and this is not a proper case for an exercise of that discretion.
  4. The use of the G-Star trade marks by Toast Sales in promotional material was not misleading or deceptive or a false representation as consumers are aware that clothing is sold through a variety of retail outlets and that the owners of the trade marks on clothing sold in a retail outlet may or may not own or control the retail outlet.

Reasons:

The Court stated that goods are promoted for sale separately from the entity that produced the goods at general department stores or clothing boutiques. The use of the G-Star trade marks by Toast Sales represents a product being offered for sale, not a specific retail service for a particular brand. The fact that the Toast Sales was offering for sale brands of clothing that competed with G-STAR supported the view that the Toast Sales was not using the G-STAR trade marks "as trade marks" in relation to retail services.

Sec 123 provides that it is not infringement of a registered trade mark to use the trade mark on goods or services if the trade mark was applied to the goods or services with the consent of the registered owner.

Attr@ttivo had agreed with G-Star only to sell G-Star's goods to distributors approved by G-Star. Attr@ttivo breached its agreement with G-Star in selling G-Star branded goods to Toast Sales as the sale was not approved by G-Star.

Although G-Star consented to the application of its trade marks to the goods sold by Attr@ttivo to Toast Sales, G-Star argued that its consent was conditional on Attr@ttivo complying with the terms of its distribution agreement and that its consent was withdrawn when Attr@ttivo sub-distributed without authority.

In Sporte Leisure Pty Ltd v Paul’s International Pty Ltd (No 3) (2010) 88 IPR 242; [2010] FCA 1162 the trade mark owner had been found not to have consented to the application of its trade mark to goods where the goods were manufactured by the licensee in breach of the license. In that case the licensee knowingly manufactured goods bearing the trade mark for export outside the licensed territory. The Court found that the trade mark owner could not be said to have consented to the application of its trade mark to goods manufactured in breach of its license. As a result the defence in Sec 123 was not applicable to the facts of the Sporte Leisure decision. If the goods in the Sporte Leisure decision had been manufactured by the licensee for sale within the territory, but subsequently sold outside the territory, the mark would have been applied with the consent of the trade mark owner and the Sec 123 defence would have been applicable.

Sporte Leisure was distinguishable however as G-Star had consented to the application of its trade mark to the goods sold by Attr@ttivo.

The Court then did not accept G-Star’s argument that its consent to the application of the G-Star trade marks on the goods sold by Attr@ttivo to Toast Sales was conditional on the goods being sold only within the territory covered in Attr@ttivo license.

Sec 123 provided a defence to use of the trade mark G-Star by Toast Sales on the goods purchased from Attr@ttivo.

Sec 123 is applicable to use of a trade mark on the goods or services covered by a registration. The Section may not apply to use of a trade mark on goods or services closely related to those covered by a registration or to trade marks "substantially identical or deceptively similar" to a registered trade mark. It was not however necessary to consider either issue in this case.

Toast Sales admitted that is reproduction of the G-Star Logo was infringement of copyright. The award of an account of profits for copyright infringement is discretionary. The purpose of the award is to require an infringer to give up dishonest and ill gotten gains that it would be unconscionable to retain. The Court did not exercise its discretion in this case as G-Star was not successful in establishing trade mark infringement and there was no evidence that consumers had purchased goods from the Toast Sales because of the G-STAR Logo.

There was no evidence to support the claims of misleading or deceptive conduct or false or misleading representations prohibited by Sections 18 and 29 of the Australian Consumer Law and the Court could not assume that a consumer was mislead or deceived by the conduct of Toast Sales. Consumers are aware that clothing is sold through various retail channels and aware that in some cases the manufacturers of clothing control the outlets and in some cases they do not.


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