Australia: Trade mark and copyright infringement not a family affair

HG Alert: 23 March 2015

There are many factors to consider when deciding whether someone has contributed closely enough to the infringement of a law to be held accountable for it. Beyond the obvious issues of whether someone had knowledge of the infringement or participated in it, the person may be implicated by receiving financial benefit from it. The case of Facton Ltd v Xu1 should provide a sigh of relief for those unsure of their standing when a loved one becomes embroiled in some shady business.

In this Alert, Partner Hayden Delaney, Associate Hayley Tarr and Law Graduate Briar Francis discuss the key elements of the case and the lessons that can be learned from it.

Key Points

  • Close relatives of people who commit trade mark and copyright related infringements won't be held liable for those infringements if they were not "involved" and did not "exercise control or assert ownership" over the infringer's business activities.
  • Factors taken into consideration include the relative's knowledge of the offender's conduct, and whether the relative has some kind of financial interest in the business (receiving proceeds from the conduct).
  • In some cases, even the relationships between the relative and others will impact upon the decision to find them liable.

Former wife with financial interests in man's business not liable for his trade mark and copyright infringements


The second respondent, Ms Ma, was previously married to the first respondent, Mr Xu. Ms Ma is a Chinese immigrant who settled in Australia with her former husband and subsequently had three children with him. One of Mr Xu and Ms Ma's children is autistic and also suffers from certain intellectual impairments. The children's care was left solely to Ms Ma before and after the breakdown of their marriage, which happened mid 2009.

A property settlement between Mr Xu and Ms Ma occurred in mid 2010, and consent orders giving effect to the same followed.

Ms Ma is the former director and shareholder of Bais Bros Pty Ltd (Bais Bros), a company operated by Mr Xu. She subsequently gave her position up to Mr Xu in the property settlement. Before and after the separation, she was also the registered licensee of several stalls at Paddy's Market Flemington, out of which Mr Xu sold counterfeit clothing.

Ms Ma is also the sole director of her own company, called Apparel 23 Pty Ltd (Apparel 23), which she created after her separation with Mr Xu. The company leased space on and off at Norwest Marketown in Baulkham Hills and also sells clothing, but it was never suggested that this business was dealing in counterfeit goods.

As a result of the property settlement, Ms Ma also became the sole owner of the warehouse in which Mr Xu stored his goods, as well as their matrimonial home. Despite arrangements being made relating to payments for Ms Ma and her children's maintenance, Mr Xu often made these payments late or not at all. Although Ms Ma and her children relied heavily on financial assistance from Mr Xu, it was accepted by the court that Mr Xu sought alternative methods to paying her. He often requested that she run errands for his businesses, and in return Ms Ma would be entitled to some of the proceeds from both the Flemington stalls and other market stalls where the counterfeit goods were sold. Even making these payments, it was understood that Mr Xu still owed Ms Ma a lot of money.

At some point, presumably around 2005, Mr Xu began engaging in numerous trade mark and copyright infringements by selling counterfeit urban clothing at market stalls in Fairfield and Ms Ma's stalls in Flemington in Sydney. Mr Xu's business, including the sale of counterfeit "G-Star" branded clothing, was operated from the matrimonial home and the warehouse both before and after these properties changed ownership according to the property settlement.

There was evidence also that Ms Ma had made large payments to people in China in the name of the business.

Case History

The applicants commenced proceedings in the Federal Circuit Court against a man named Hasan Gogebakan, and later a man named Hakan Turkkan, seeking relief in connection with dealings in the counterfeit goods in December 2010.

Mr Xu was made a respondent to the proceedings on 25 August 2011, and Ms Ma was later joined as second respondent on 29 August 2011, along with the two companies owned by the couple.

Default judgements against Mr Xu and the two companies were obtained, resulting in the decision that all had infringed G-Star trade marks.

This particular hearing revolved around Ms Ma and whether her involvement in Mr Xu's infringements was direct enough to constitute her own liability under the Trade Marks Act, the Copyright Act, the Fair Trading Act and the common law of tort2.

The Judgement

The applicants, Facton Ltd, G-Star Raw CV and G-Star Australia Pty Ltd (collectively G-Star) claimed that the clothing in question was fraudulently branded with the "G-Star" registered trade marks. This was not disputed in this hearing. Accordingly, the case against Mr Xu was clear – he had knowingly infringed the G-Star trade marks by ordering counterfeit clothing en masse from China and selling them in Australia. The issue of his former wife's involvement prior to and after their separation was much messier.

Ms Ma denied any involvement in the dealings by Mr Xu and his business with the counterfeit clothing. She asserted that she knew only that his business sold clothing, not the brand of the clothing, and there was no evidence suggesting that she had ever personally handled or sold those items. The extent of her active participation as a director and licensee of the properties in question, as well as the purpose behind her collection of proceeds from the fraudulent business, was in dispute.

Ms Ma had a limited comprehension of spoken English and only a basic ability to read it. She testified in court with the assistance of an interpreter. Her former husband was much more fluent and Ms Ma relied on him to translate letters and instruct her in any family business matters. She admitted that she knew Mr Xu had made her sole director of his companies and owner of the market stalls to avoid tax implications, and she testified that he had on at least one occasion forged her signature on a lease for a luxury company car. She testified that she acted completely under Mr Xu's instructions, including signing whatever he told her to, and making payments to the people he asked her to. It was unlikely based on available evidence that the businesses were even left in her care while Mr Xu was overseas. The court accepted Ms Ma's arguments; how much she knew about the day to day business of the Bai Bros and Mr Xu's business is questionable, and not something G-Star could definitively prove. To this extent, the judge found that Ms Ma did not practically exercise effective control of, or assert ownership over, the businesses dealing in the counterfeit goods.

The court also found that the payments Ms Ma accepted from the proceeds of the counterfeit business was not as a result of her position or ownership of the business. The judge accepted that Ms Ma's running errands for Mr Xu and accepting money from him were fuelled solely by her concerns for her and her children's wellbeing. In particular, the judge mentioned that the messy breakdown of the relationship between her and Mr Xu, and Mr Xu's subsequent refusal to pay child support led her to distrust Mr Xu. Because of his pushy nature and the way he had deceived her previously, the judge considered that she knew Mr Xu would do whatever he wanted with their collective money and businesses irrespective of whether he obtained her consent or approval. Due to this relationship, she had no reason to believe he would agree to supporting her and her children unless it was beneficial to him. Similarly, the court was satisfied that she collected the money from Mr Xu in cash because she was aware that she wouldn't get it from him any other way than seeing him in person and pressuring him. Her dependence on Mr Xu was not by choice, but her priority was ensuring that her children – particularly her autistic son with special needs – had sufficient care and education.

It was therefore held that Ms Ma had not imported the counterfeit goods, nor had she authorised this to happen. It was similarly found that her acceptance of money from Mr Xu's businesses was to be treated as a repayment of the debt he owed Ms Ma, as well as maintenance pursuant to their property settlement, rather than a payment in relation to her position as licensee and director.

The proceedings were dismissed.


Ms Ma's case is a timely reminder in such a litigious world that the law is not strict beyond reason with regards to intellectual property matters. Where a person has limited comprehension and control over a relative's questionable business, the court will look at all of the facts to consider their liability. Ms Ma's circumstances are rare, however, and it is important to understand that any active participation in intellectual property related infringements by a person with knowledge of the consequences will result in the full force of the law being used against them. The law is not forgiving of directors of companies who authorise or participate in trade mark and copyright infringements and then claim that they were unaware of it.

It is also best to take steps to mitigate against unknowingly dealing with, or receiving the proceeds of, businesses that do not maintain sound intellectual property practices.


1 [2015] FCA 66.

2 1995 (Cth); 1968 (Cth); 1987 (NSW).

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

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.

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