Damages awarded based on 'reputational damage' in design case

In Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd ([2008] FCA 74, February 15 2008), the Federal Court of Australia has awarded damages to the owner of a registered design in respect of one of its ladies' dresses based not on lost sales, but on the 'reputational damage' suffered.

The question of infringement was not substantively in issue before the court, as the respondents (Innovative Lifestyle Investments Pty Ltd and Clothing Outlets Pty Ltd) admitted that they had sold a dress (the 'Lili' dress) which was substantially similar in overall impression to Review Australia Pty Ltd's registered design. The respondents also admitted that they used the Lili dress for the purposes of their trade or business.

The court thus moved on to consider the question of damages. The most obvious way in which Review might have established its claim for damages would have been to demonstrate that the respondents' sale of their Lili dress had a detrimental impact on the sales of its own dress. However, for reasons that were not made clear to the court, Review's evidence of lost sales was described by the court as "curiously deficient". Therefore, no award was made under this head of damage.

Instead, the court accepted Review's evidence that it had put considerable value on the perceived originality of its dresses and that this was an important aspect of its image in the market. Accordingly, the court concluded that if Review had a reputation - however diffuse - for originality of design, a consumer might show a particular interest in Review's range of dresses and be alert to the release of new designs. However, if dresses bearing a substantial similarity to those of Review also appeared in other shops and under other brands, the consumer's perception of the originality of Review's design would necessarily be weakened. The court also accepted that, in an extreme case, the consumer's perception may be that Review's garments were not special (or original). On the balance of probabilities, the court held that the market presence of the respondents' dress brought about some minor dilution of Review's reputation for originality.

The court then considered the quantum of damage suffered by Review. Because of the uncertainties involved, and because Review made an apparently conscious choice not to put satisfactory sales figures before the court, the court considered that it needed to be "very cautious" in its assessment and awarded the sum of A$7,500 for the probable diminution of Review's reputation for originality brought about by the respondents' infringement.

Finally, the court held that Review should be further compensated because the respondents continued to sell the Lili dress after having been informed of Review's registered design by the latter's solicitor. Accordingly, the respondents were also ordered to pay the sum of A$10,000 as additional damages pursuant to Section 75(3) of the Designs Act.

Julian Gyngell, Julian Gyngell, Wahroonga