A recent New Zealand Court of Appeal decision highlights the woes that await those who fail to take New Zealand IP advice before selling products in New Zealand.
The Court of Appeal judgment in Jeanswest Corporation (New Zealand) Limited v G-Star Raw CV & Anr [2015] NZCA 14 sets the scene as follows: "On a wet day in August 1995 Monsieur Morisset was sitting in a cafe in the south of France". Unfortunately the glamour of the south of France is swiftly dispensed with as we move to New Zealand, where, in 2010, Jeanswest imported and sold 62 pairs of its "Dean Biker" jeans, designed in Australia and made in China.
G-Star, whose Elwood jean had been conceived by Monsieur Morisset on that rainy, south of France day, and according to G-Star assumed iconic status in the world of jeans, alleged that the Dean Biker jean infringed copyright in its Elwood jean. In Australia, a copyright claim cannot generally be made in respect of clothing design due to provisions which prevent design/copyright overlap. Not so however in New Zealand, where copyright claims can be brought in those circumstances for 16 years from the date of first industrial application of the artistic work.
Jeanswest agreed not to continue to sell the jeans (the 62 pairs it had imported had already been sold) but denied that copyright had been infringed. G-Star filed proceedings and in October 2013 the High Court found that Jeanswest had infringed copyright. Shortly before trial a "sample order" document was disclosed by Jeanswest, the document prepared by Jeanswest Australia in the course of its creation of the Dean Biker jean, which was sent to its Chinese manufacturers together with an "original jean sample". The sample order contained instructions of the changes which were to be made to the original jean sample. The author of the sample order, Ms Garfield, gave evidence that the original sample was a jean manufactured by another company, however she could neither confirm nor deny whether it was a G-Star jean. Importantly Jeanswest did not call Ms Garfield to give evidence and she was subpoenaed by G-Star. This meant that G-Star was unable to cross-examine her on this crucial point. Nevertheless the High Court found that an inference of copying could be made and that a substantial part of the Elwood jean design had been copied.
Damages of $325 were awarded, being the profit Jeanswest had made on the infringing jeans. However Heath J declined to award any additional damages. A fact which appeared to weigh heavily on the judge in this respect was his conclusion that Jeanswest Australia treated Jeanswest NZ as no more than a branch office and that the different legal position in New Zealand had not been considered and so not brought to the attention of those in the Australian design in production team. The breach of New Zealand law was therefore not intentional.
So far, it appeared somewhat of a pyrrhic victory for G-Star given the extremely low level of damages awarded, but from here, things went from bad to worse for Jeanswest. One might have thought it would be content to walk away, pay its $325 in damages (and the, no doubt, much more substantial costs of G-Star), and talk to its lawyers about New Zealand copyright law. But Jeanswest appealed the infringement finding and the grant of an injunction to the Court of Appeal. G-Star cross-appealed the refusal of Heath J to grant additional damages.
The Court of Appeal affirmed the High Court's finding of copyright infringement. Notably, while Jeanswest maintained that the Elwood jean was not the original sample used, it elected not to call any of the three people who could have given evidence as to the way in which Jeanswest had gone about designing its Dean Biker jean. Furthermore not only had four of the five main design features been copied (the fifth deliberately omitted), the Court of Appeal found that the evidence had established copying at a much more detailed level, down to the measurements of the Elwood jean.
Turning then to the question of additional damages, the Court of Appeal referred to factors weighing in both directions. On one hand the importation was very small and Jeanswest had immediately ceased selling the jean when put on notice. However aspects of the way in which Jeanswest had defended the claim reflected badly on it, not least of all the late disclosure of the sample order and the "glaring inconsistency" between Jeanswest's persistent denial of copying and its decision not to call witnesses who could have substantiated that denial. Finally, ignorance of New Zealand law was no excuse. Jeanswest lacked an effective system for establishing whether the importation breached New Zealand copyright law and it should have been a simple matter for a substantial business like Jeanswest to obtain the required legal advice.
In the end result, the Court of Appeal awarded $50,000 in additional damages, as well as upholding the High Court's decision to uplift costs by 25% due to the pre-trial conduct of Jeanswest.
This case serves as a salutary reminder to Australian businesses that the law in New Zealand, while closely related to Australian law, is not always the same in every respect. Mistakes can be costly, and avoided by obtaining legal advice on both the Australian and New Zealand position.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
