Intellectual Property Development Corporation Pty Limited v Primary Distributors New Zealand Limited
High Court of New Zealand
Asher J
24 April 2008
The first and second plaintiffs (IPDC and FDNZ) sought an account of profits against the first defendant (PDNZ) in respect of trade mark infringement of the trade mark HEFTY in New Zealand.
The HEFTY range of products included cling film wrap, paper and other products. Until March 2005, the HEFTY registered trade marks in New Zealand were owned by an Australian company, Cartigny Pty Limited (CPL). From the mid 1990s, PDNZ was the exclusive distributor of HEFTY branded products in New Zealand. It did not acquire these from CPL but rather acted as CPL’s agent.
In March 2005, CPL was placed into receivership. On 31 March 2005, PDNZ entered into a three month trade mark licence agreement with the administrator of CPL. Under this agreement, PDNZ had three months to sell out the HEFTY branded stocks remaining in New Zealand. The agreement did not give any general licence to import HEFTY branded product from Thailand (where it was manufactured). In the agreement PDNZ acknowledged that the trade mark belonged to CPL.
On 1 April 2005, CPL was placed into liquidation. PDNZ made an offer to purchase the HEFTY trade marks but unbeknown to PDNZ the administrator was negotiating with the plaintiff for purchase of the trade marks.
In the interim, PDNZ decided to purchase HEFTY branded products direct from the Thai manufacturer. It then imported and sold these in New Zealand. After expiry of the three month agreement, it also continued to sell remaining stocks of HEFTY products purchased from CPL. PDNZ acknowledged at trial this infringement of the HEFTY trade marks. From late 2005, PDNZ thought that its Thai supplier might be able to acquire the HEFTY trade marks.
On 20 December 2005, IPDC acquired the HEFTY trade marks in New Zealand. The agreement assigned not only the trade marks but also the right to sue and retain any damages and other remedies (including an account of profits) for past infringement.
In January 2006, IPDC emailed PDNZ enquiring about HEFTY product, without mentioning that it had acquired the New Zealand registered trade marks. In February 2006, the Thai supplier informed PDNZ that it had been unsuccessful in acquiring the HEFTY trade marks in New Zealand. From that point, PDNZ was aware that a different party had acquired the New Zealand trade marks, although it did not know who it was. Despite this, PDNZ continued importing and selling HEFTY labelled products until July 2006.
On 13 July 2006, IPDC wrote to PDNZ advising that it had recently become aware that PDNZ was distributing HEFTY branded products. It required undertakings that PDNZ would cease distribution, which PDNZ gave. In addition, IPDC sought financial compensation.
At trial, PDNZ accepted that it had infringed the trade marks. IPDC elected an account of profits. PDNZ’s position was that IPDC should not be entitled to an account for approximately 11 months from the beginning of September 2005 until July 2006 because IPDC’s staff or executives were aware that PDNZ was infringing but did not protest. It further claimed that, as an account of profits is an equitable remedy, IPDC (through its actions) lost its right to the remedy during this period. Alternatively, it contended that IPDC’s conduct amounted to waiver or acquiescence or involved the doctrine of laches i.e. that IPDC’s inaction amounted to an assent to PDNZ’s continued marketing of HEFTY branded products and therefore disentitled IPDC from claiming relief.
In his decision, Asher J was not satisfied that in August 2005 IPDC acquired any knowledge that HEFTY branded products were still being actively marketed in New Zealand. (Even if, contrary to these findings, IPDC did have some knowledge, IPDC did not own the trade mark until 20 December 2005 and had no right to complain about let alone stop PDNZ’s activities. No equity in relation to the profits could arise from IPDC’s lack of protest.)
But IPDC did become aware of PDNZ’s activities on 18 January 2006 and had this understanding confirmed in March 2006. It permitted the infringement to continue.
Asher J held that an account of profits was in its inception an equitable remedy. The remedy is discretionary. The remedy’s equitable origins meant that a plaintiff could not stand by and permit the defendant to make profits over a period and then expect to claim those profits. An account of profits, being originally an equitable remedy should be treated as having an equitable character in relation to trade mark infringement. It was not fair that a trade mark owner who knowingly permitted a competitor to infringe its trade mark and could not prove any loss, should be able to claim the infringer’s profits. A protest might well have halted the infringement and cut short a claim for an account of profits. To award profits in such a situation would be to give the owner a boon that it had not earned and indeed might reward its failure to protest. In its discretion, the Court would not award an account of profits for the period 18 January 2006 onwards.
However there was no conduct on the part of IPDC that disentitled it to profits (pursuant to the assignment of rights) for trade mark infringement during the period prior to 18 January 2006.
In dealing with the defence of laches, Asher J found that the delay of six months from knowledge in January 2006 to action in July 2006 was not of sufficient length to amount to laches. Further there was no evidence of significant prejudice resulting from the delay or a sufficient change of circumstances.
Finally, the Court looked at the defence of acquiescence. Asher J held that there was a question whether acquiescence survives today as a doctrine on its own separate from laches on the one hand and estoppel and waiver on the other. Acquiescence requires some sort of conduct by the plaintiff from which assent to the complained conduct can be inferred. IPDC’s action was not such an event that assent to the infringement could reasonably be inferred from it. Similarly the lack of any implied representation or reliance meant that a waiver or estoppel did not apply.