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Compensation for counterfeit goods

18/04/2011

The Australian Federal Court recently reviewed how to work out damages for trademark infringements. Mr Rifai illegally manufactured, imported and sold counterfeit “G-Star”  apparel.  It was plain that he intended to infringe copyright and trade mark laws.   The only real issue was the measure of damages.  The Court worked out the statutory remedy  in the same way as it would assess damages in tort; that is,

  • Damages are compensatory and not punitive;
  • Damages should restore the IP owner to the same position as if there had been no infringement
  • damages should be liberally assessed
  • The plaintiff must prove the extent of any loss, even if some speculation and guess work is involved
  • In the absence of any evidence, nominal damages should be awarded.

Mr Rifai continued, quite deliberately, to sell counterfeit “G-Star” clothing even after he consented to the seizure of infringing goods and after he signed undertakings to desist doing so.  However, in the absence of any evidence of malice or spite or insult or fraud or insolence, the Court was unwilling to award exemplary damages.  On the other hand, it was willing to award additional damages pursuant to s 115(4) of the Copyright Act 1968  in order to strip Mr Rifai of his profits from the infringing goods.  Additional damages can be entirely disproportionate to the compensatory award in order to have a punitive and deterrent effect. The likely profits were weighed against the legal expenses of the proceedings, the value of imported goods forfeited as well as Mr Rifai’s limited means,
demonstrated remorse and early admissions.

Read the Federal Court’s judgement in Facton Ltd v Rifai Fashions Pty Ltd.

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