Federal Court considers accessorial liability in 'sunny' case

In SMA Solar Technology AG v Beyond Building Systems Pty Ltd (No 5) ([2012] FCA 1483, December 21 2012), the Federal Court has found that use of the mark SUNNY ROO in connection with solar inverters and closely related installation services infringed the trademark SUNNY BOY.

This case concerned an action for passing off, breach of the Trade Practices Act and the Australian Consumer Law (ACL) and trademark infringement brought by the SMA companies against Beyond Building Systems (BBS) and Ipevo in relation to the use by BBS of the words 'sunny roo' and logos comprising the words 'sunny roo' and a cartoon character of the head of a kangaroo, in relation to solar panels, inverters and solar energy accessories, and inverter installation services.

From 1999 onwards SMA sold in Australia inverters for solar energy under the trademark SUNNY BOY; in 2005 it registered that trademark in respect of, among other things, solar energy transformers, inverters, battery storage and measuring and controlling devices. It sold its inverters through a number of Australian distributors and installers including, from 2007, BBS. By 2010 SMA's sales in Australia were of the order of 100,000, about 50% of the Australian market. SMA had also carried out substantial advertising, promotion and training under the SUNNY BOY mark. In August 2009 Vincent Smith, a director of BBS, registered the SUNNY ROO logo in respect of solar panels, solar collectors and installation services for solar energy systems. In May 2010 the registration was assigned by Smith to Ipevo, of which he was also a director. On the same day, Ipevo granted a licence to BBS to use its intellectual property relative to retail and wholesale solar sales in Australia. From July 2010 BBS commenced importing from China, and selling and installing solar panels and inverters under the trademark SUNNY ROO and the SUNNY ROO logo as well as, for a time, continuing to sell and install the SUNNY BOY inverters. At trial SMA adduced evidence of several instances of actual confusion among purchasers of BBS's SUNNY ROO products and installation services.

SMA issued proceedings in the Federal Court in June 2011. Subsequently, BBS went into voluntary liquidation and was not represented at the hearing. To succeed against Ipevo, SMA had to establish that:

1. the actions of BBS were in breach; and
2. Ipevo was liable as a joint tortfeasor and/or that it was knowingly concerned in BBS's misleading and deceptive conduct contrary to the provisions of the ACL.

On the issue of passing off, the court found that SMA "has a reputation in the words 'sunny boy' as designating its solar inverters, that BBS made one or more misrepresentations the reasonably foreseeable consequence of which was to injure that reputation and that, in fact, that reputation was injured" . Moreover, it found that "this was amply borne out by the fact that there was substantial evidence that consumers were in fact misled". The court rejected the argument that the use of the term 'sunny' was purely descriptive and not likely to be understood as signifying a connection to SMA. The court therefore held that the elements of the action for passing off had been established and, for similar reasons, BBS's conduct had been misleading and deceptive. The court inferred actual harm to SMA's goodwill based on the evidence of actual consumer confusion.

On the issue of infringement by BBS of SMA's registered trademark, although the court declined to adopt SMA's submission that BBS had taken the essential feature of the SUNNY BOY mark by using the word 'sunny', it nevertheless concluded that, having regard, among other things, to the fact that the words 'roo' and 'boy' are both monosyllabic nouns each consisting of a consonant followed by a diphthong, the marks were deceptively similar. It held, therefore, that the use of the SUNNY ROO marks by BBS in relation to inverters constituted infringement under Section 120(1) of the Trademarks Act. 

In relation to the use of the marks on solar panels, the court held that those goods are not goods of the same description as inverters. It did so on the basis that, in its view, solar panels are devices for generating electricity, while inverters are devices for converting direct current energy into alternating current and do not generate power; the one is not substitutable for the other (this finding may be regarded as questionable having regard to the fact that the inverters in question are designed for use with solar panels, and are purchased and installed as integral parts of a solar energy supply system). The court therefore declined to find infringement under Section 120(2) in relation to the use of the mark in respect of solar panels. It did, however, find that the service of installation of inverters was a service closely related to the inverters themselves and therefore found infringement in relation to the use of the BBS marks for that service. 

A determination of whether or not Ipevo was liable as a joint tortfeasor and whether it was knowingly concerned in BBS's breach of the Australian Consumer Law turned on the construction of the licence given by Ipevo to BBS to use its intellectual property. The submission by SMA that the licence included a licence to use SUNNY ROO as part of the intellectual property was accepted. The court held that Ipevo's licence to BBS meant that it satisfied the test propounded by the High Court in Thompson v Australian Capital Television Pty Ltd ([1996] HCA 38), namely that "to constitute tortfeasors, two or more people must act in concert in committing the tort".

To establish that Ipevo was knowingly concerned in the misleading and deceptive conduct of BBS, it was necessary to show that Ipevo "knew that licensing the use of the SUNNY ROO name to BBS to use on its solar inverters was likely to mislead consumers into believing there was a connection with SMA". The court inferred that this was so from the fact that, prior to the licence agreement, BBS was installing SMA's inverters, noting that it was "too much to believe that, as BBS began to use SUNNY ROO to market its inverters (and panels), it escaped BBS's attention that there was more than a passing similarity to the name SUNNY BOY". The court also noted the failure by Ipevo to call Vincent Smith or any other member of the Ipevo's management and drew an adverse inference from that, citing Jones v Dunkel ([1959] HCA 8). Not only was Smith a director of both BBS and Ipevo but he executed the licence agreement on behalf of both companies and was described in BBS's promotional literature as being responsible for the development and implementation of business plans and strategies.

Both BBS and Ipevo were therefore held jointly liable for passing off, breach of the ACL and trademark infringement insofar as it related to use of the SUNNY ROO mark in relation to inverters and the installation of inverters.

Des Ryan, Davies Collison Cave Law Pty Ltd, Melbourne