The recently inserted provision for additional damages
can lead to substantial awards and an aggrieved trade mark owner
can now recoup more than its legal costs if
Certification of goods and services is becoming increasing
important and widespread in the Australian market. Although most
commonly associated with food products, it can also extend to
clothing, mechanical equipment and to services, such as the
sustainability or environmental credentials of products or services
and even to taxation services. Since there is a stringent
registration process for certification marks under the Trade Marks
Act (including approval by the ACCC), many groups are simply
allowing their trade marks to be used for goods and services that
comply with their standards.
What if one of these marks is infringed? What (if any) damages
can be awarded? A recent Federal Court case gives some guidance
(Halal Certification Authority Pty Limited v Scadilone Pty Limited
 FCA 614).
Briefly, some kebab shops sought assurances from their supplier,
Quality Kebabs Wholesalers, that the kebabs were halal. A
certificate to that effect was given to the shops.
These certificates used the trade mark of the Halal
Certification Authority. Unfortunately, they were not issued by the
Authority, which sued two kebab shops and the wholesalers under the
Trade Marks Act and the Australian Consumer Law. The Federal Court
found that the marks had been infringed by the wholesalers and the
Additional damages for infringement were inserted into the Trade
Marks Act in 2012 by section 126(2) as a deterrent, principally
with trade in counterfeit luxury goods in mind. Additional damages
impose a liability on the infringer of a trade mark when the brand
owner does not suffer any actual loss or the profit derived by the
counterfeiter cannot be easily quantified or is small.
In this case, only nominal standard damages of
$10 were imposed on the wholesaler and on each of the two kebab
shops that displayed the certificates that reproduced the trade
Justice Perram of the Federal Court awarded
additional damages saying they are not meant to
compensate the trade mark owner but are intended "to make
Factors that the Court can consider include:
the flagrancy of the infringement;
the need to deter similar infringements;
the conduct of the infringing party; and
any benefit from the infringement.
The managing director of the wholesalers sought to blame an
ex-employee, now conveniently living in Germany, for producing
false certificates that his company's meat was prepared in
accordance with Islamic law and was halal. This
"ridiculous" suggestion, along with other aggravating
factors, meant that "additional damages" under the Trade
Marks Act were awarded, totalling $91,015.00. This sum was 150% of
the annual licence fees that would have been payable had the
wholesaler been properly certified by the trade mark owner.
The premium (150% of the usual licence fee) was imposed to avoid
a situation that would amount to "use now, pay if
The award of additional damages may have been increased if it
had been proved that the meat was not in fact halal, leading to
devout Muslims inadvertently eating non-halal meat. There was no
evidence on this point. Damages may also have been greater if, as
was likely, it was proved that a large number of false certificates
had been issued.
Lessons for trade mark owners
This decision shows that the recently inserted provision for
additional damages can lead to substantial awards and an aggrieved
trade mark owner can recoup more than its costs if successful. The
ancillary claims for breach of the ACL – misleading and
deceptive conduct – though made out, did not sound in
monetary benefit for the trade mark owner because under the ACL
only actual damage can be compensated.
This case also shows the importance of vigilance by a trade mark
owner in safeguarding its reputation if it certifies goods and
services and also the need to establish by evidence all factors
relevant to the alleged infringement.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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