Additional damages for trade mark and copyright infringement and exemplary damages for passing off were recently considered in the Federal Court case Geneva Laboratories Limited and anor v Prestige Premium Deals Pty Ltd and ors (No 5) [2017] FCA 63 (Geneva (No 5)).

Background

The facts involved a sophisticated scheme operated by the Respondents, in which high quality counterfeit Bio-Oil products were sold through the same channels as genuine Bio-Oil products produced by the Applicants, namely retail pharmacies.

During the course of litigation, some of the respondents were found to have, amongst other things, engaged in passing off and trade mark and copyright infringement. Subsequent to this, Geneva (No 5) considered the quantum of damages and costs payable.

Rather unusually, in Geneva (No 5) the Respondents did not adduce evidence in relation to damages or costs and the Court relied exclusively on the evidence of the Applicants.

Direct compensatory and reputational damages

In its calculation of direct compensatory damages, the Court took the average of sales forgone and profitability applied to payments for importation of counterfeit product to arrive at $425,000. Furthermore, considering that the widespread counterfeiting was inherently damaging to reputation, the Court also awarded the sum of $50,000 in reputational damages.

Additional and exemplary damages

In considering the Applicants’ claims for additional and exemplary damages, the Court provided useful guidance on the relevant principles for, and circumstances in which, such damages may be awarded.

The Court summarised the key features of an additional damages assessment as follows:

1) there is no need for proportionality to compensatory damages (although there is nothing to indicate that that is a forbidden consideration or benchmark);

2) an award involves an element of penalty;

3) judicial disapproval has a part to play;

4) the terms of the statutory provision as to the non-exhaustive matters that can be taken into account in considering an award of additional damages do not constitute a precondition for them to be awarded;

5) flagrant conduct includes that which is deliberate and calculated in disregard of the injured party’s rights, or a cynical pursuit of benefit;

6) post-infringement conduct, such as in the conduct of the proceedings, is generally relevant more to costs than to additional damages but it is still relevant;

7) additional damages encompass but are not the same as aggravated or exemplary damages at common law; and

8) specific deterrence has a part to play, including general deterrence.

The Court also clarified the availability of additional and exemplary damages in cases where multiple causes of action are made out, observing that:

  • neither exemplary nor aggravated damages can be awarded in relation to the misleading or deceptive conduct statutory contraventions because those provisions are confined to compensatory damages for proven loss; and
  • exemplary damages for passing off should not be awarded on top of additional damages for copyright and/or trade mark contraventions.

In this case, the Applicants had sought $300,000 in additional damages. The Court ultimately awarded $212,500 in additional damages on the basis that such an award was “reasonable and appropriate” as it was half the award of compensatory damages. The Court noted (at [85]):

While there is no principle that requires any linkage between the two, nor is taking that into account proscribed. In this case, the compensatory damages sum provides a useful yardstick and provides a coherent rationale for the figure arrived at. It meets any suggestion that the award is either arbitrary or impressionistic.

In awarding the amount of $212,500 in additional damages, the Court made a number of findings, including:

  • the case involved flagrant and highly deceptive behaviour with respect to copyright infringement, trade mark infringement and passing off because the impugned actions had taken place over a substantial period of time and with a virtual certainty of the counterfeit Bio-Oil being taken to be genuine Bio-Oil by both consumers and retail pharmacists;
  • there was a substantial need to punish and to deter, both in respect of the Respondents specifically and any other would-be contravener generally;
  • the conduct of the Respondents was uncooperative and obstructive and wrongdoing had never been acknowledged, let alone admitted;
  • although not precisely quantified, it is clear that there was a substantial financial gain made by the Respondents, or at least one or more of them, by selling to pharmacies counterfeit Bio-Oil in place of genuine Bio-Oil. In this regard, a gross figure of $681,309 was paid to overseas suppliers by the Respondents, so it was reasonable to infer that a substantial profit was made or intended to be made to recoup that cost and make a substantial profit on top of that); and
  • genuine Bio-Oil is a healthcare product for which a premium price is paid by consumers, who are entitled to trust that they are getting what they paid for, a factor that feeds back into the need for deterrence, but also as a matter of public confidence that such behaviour is taken seriously by the Courts. Conclusion.

This decision provides useful guidance on the principles relevant to an award of additional and exemplary damages for trade mark and copyright infringement and exemplary damages for passing off.