The Federal Court of Australia has found an Australian swimwear designer’s comments made on Facebook about her rival swimwear label Seafolly to be misleading and deceptive conduct. The decision serves as a reminder that that social media is not immune from the laws that apply to businesses generally.

Background

In September 2010, Ms Leah Madden, principal and designer of the swimwear label White Sands, created a Facebook album on her personal page entitled “The most sincere form of flattery?” The album contained a series of composite photographs of White Sands’ swimwear and similar swimwear from Seafolly’s collection. Ms Madden captioned each photograph with the name of the designer, the name of the swimwear and date (or alleged date) of release of the design.

Ms Madden posted various comments on the Facebook album:

  • “Why allowing ‘buyers’ to photograph your collection at RAFW can be a bad idea.”
  • “Ripping off is always going to happen, but sending in a dummy ‘buyer’ to get photos is super sneaky!” 
  • “Seriously, almost an entire line-line rip-off of my Shipwreck collection.”

Ms Madden then emailed a copy of her composite collection to several media outlets, including newspapers and trade publications, asking “Is it just us, or has Seafolly taken a little to [sic] much ‘inspiration’ from White Sands?”

Upon becoming aware of Ms Madden’s claims and actions through the media, Seafolly issued a press release, stating that Ms Madden had knowingly made false claims, which were maliciously intended to damage Seafolly. Ms Madden shortly thereafter removed the Facebook album but continued to post references about Seafolly’s alleged conduct on Facebook.

Seafolly brought proceedings against Ms Madden for misleading and deceptive conduct under the Trade Practices Act 1974 (now replaced by the Competition and Consumer Act 2010), injurious falsehood and copyright infringement.

Personal accounts are no defence

Although Ms Madden’s Facebook postings were made on her personal page, the Court held that because Ms Madden was a trade competitor and her comments related to Seafolly’s business and “sought to influence the attitudes of customers and potential customers of Seafolly”, her Facebook comments were made “in the course of trade or commerce” and as such were subject to the Trade Practices Act.

Think before you type

The Court found that the Seafolly swimwear designs, published on Ms Madden’s Facebook page and in her correspondence, had, in fact, been on the market or in production well before Ms Madden created and released her similar swimwear designs.

Although Ms Madden did not use clear and unequivocal statements that Seafolly had “copied” her designs, the Court held that, when read in context, Ms Madden’s statements were intended to, and did in fact, convey to her audience that she believed, erroneously, that Seafolly had copied her designs and as such constituted misleading and deceptive conduct.

The Court observed that Ms Madden could have taken a number of investigative steps that would have revealed the error in Ms Madden’s allegations and avoided the costly and bitter dispute. The case highlights the importance of making proper enquiries prior to making allegations, particularly in an online forum such as Facebook, where allegations can be widely and quickly propagated.

Facts versus opinions

The Court rejected Madden’s argument that she was no more than expressing an opinion about the similarity of the depicted swimwear designs. The Court held that, regardless of Madden’s intentions or purpose in making the Facebook comments, it was the understanding of the audience which was significant and that her statements were taken by her audience to be allegations of copying. Further, the Court held that Ms Madden was “reckless” and as such Ms Madden’s allegations lacked any honest foundation.

In turn, Ms Madden’s cross-claim against Seafolly for defamation and misleading and deceptive conduct arising out of its press release failed. Whilst Seafolly’s comments were considered defamatory, were they held to be defensible in that they were substantially true and proportionate to the seriousness of Madden’s allegations.

In whom does copyright vest?

Seafolly also sought a claim against Ms Madden for infringement of Seafolly’s copyright by way of reproducing Seafolly’s photographs. The Court rejected Seafolly’s claim of infringement, on the grounds that Seafolly could not demonstrate that, at the date Ms Madden posted the photographs on Facebook, Seafolly was the legal owner of the photographs.

Although the Court recognised that Seafolly had been given retrospective rights from the legal owner to sue for past infringements, Seafolly’s action against Ms Madden was flawed as it had sought infringement and subsequently damages in its own right and not on behalf of the legal owner. The Court importantly acknowledged that even if Seafolly had brought the action on behalf of the legal owner (rather than its own name), no evidence had been submitted by Seafolly that the legal owner had suffered any damage as a result of Ms Madden’s reproduction.

This decision provides a useful reminder to businesses when engaging contractors to ensure that ownership of intellectual property rights are dealt with upfront.

Take home lessons

The decision serves as a reminder that laws that apply to businesses generally also apply to their social media activities. Businesses need to be careful that statements made on social media are correct and can be substantiated. Businesses should be particularly aware of risks relating to social media: the ease by which comments can be hastily typed without proper reflection and the consequent speed by which these statements can spread. Larger businesses should also ensure that they have appropriate policies and procedures governing use of social media by its employees.