Ever been the subject of court proceedings you thought were completely unjustified? Thankfully under the Trade Marks Act and the Copyright Act remedies are available to those who are subject to such proceedings…or are they?

Section 105 of the Trade Marks Act 2002 enables a defendant in a proceeding for trade mark infringement to ask the Court to declare the plaintiff’s bringing of the proceeding is unjustified and order the plaintiff to pay damages for any loss suffered by the defendant. 

The Court must not grant relief however if the plaintiff “proves that the acts in respect of which proceedings are brought constituted, or would have constituted if they had been done, an infringement of the trade mark concerned”. 

Section 130 of the Copyright Act 1994 contains an almost identical provision for unjustified copyright infringement proceedings.

Until recently there were no cases addressing how section 105 of the Trade Marks Act was to be applied. This changed in May with the High Court’s decision in Tasman Insulation New Zealand Ltd v Knauf Insulation Ltd & Others [2014] NZHC 960. At [265]-[267] of this decision, Brown J applied Master Kennedy-Grant’s approach in Heinz Watties (New Zealand) Ltd v Effem Foods Pty Ltd(2001) 7 NZBLC 103,437 (HC) decided under the equivalent provision of the Copyright Act. 

Master Kennedy-Grant’s advanced that proceedings would be justified if a plaintiff (even if unsuccessful) could show that it had acted in the genuine belief that there had been or might have been an infringement. In this context, ‘justified’ means capable of (at least a morsel of) a credible explanation, and ‘genuine belief’ means a belief held on reasonable grounds and after taking legal advice. Consideration of the plaintiff’s ‘genuine belief’ thus requires an assessment of the legal advice given to the plaintiff, and then whether the plaintiff’s belief was held on reasonable grounds. 

Seems fair enough…until you look a little closer and realise that there is one major problem facing every defendant who seeks an order for unjustified proceedings. Put another way, there is one major flaw in the approach that effectively renders it impossible for any defendant to establish that proceedings are unjustified.

The problem is solicitor-client privilege. Solicitor-client privilege – or legal privilege – means that any document containing advice from the solicitor to the client in relation to the law and the merits of the client’s claim(s) against the defendant do not have to be produced in evidence at trial. This advice, however, is critical to a defendant if it is to argue with an appropriate evidential basis that a plaintiff did not act with a genuine belief.

Legal privilege can be challenged before the Court; however such a challenge is unlikely to succeed if the Court sees it as nothing more than a fishing expedition for evidence to support a claim for unjustified proceedings. 

So how then does a defendant, without the necessary evidence, counter the plaintiff’s assertion that it acted in a genuine belief? The answer is – with great difficulty.  

I believe that the approach as it is currently formulated does not reflect the purpose of the provisions in the Trade Marks Act and the Copyright Act. I believe the approach places a lesser burden of proof on a plaintiff than the wording of the sections suggest. 

The sections, you will recall, stipulate that the Court must not grant relief to a defendant if the plaintiff proves that the defendant’s actions or intended actions have or would have infringed the plaintiff’s trade mark. The focus is clearly on the plaintiff proving infringement at some level, otherwise the proceeding is unjustified in so far as the plaintiff has no credible explanation for bringing the proceedings in the first place.

So what constitutes ‘a credible explanation’? I believe the answer requires the Court to ask this question: “on the basis of accepted principles of trade mark law, did the plaintiff have reasonable grounds to issue proceeding?”. Answering this question does not require any assessment of what legal advice was given to the plaintiff because it presumes (as it should) that the plaintiff received competent and objective legal advice in the first place.

In summary then it seems that proving court proceedings for trade mark or copyright infringement are unjustified is a Mount Everest of a task for any defendant. The mountain is perhaps potentially scalable but not without a great degree of difficulty and failure along the way. 

This article first appeared in the Waikato Business News