Lack of evidence hits US film studios' infringement claims

In Paramount Pictures Corporation v Hasluck, the Federal Court of Australia has awarded only nominal damages to five major US film studios, namely Paramount Pictures Corporation, Twentieth Century Fox Film Corporation, Disney Enterprises Inc, Universal City Studios LLP and Columbia Pictures Industries Inc, which commenced proceedings for infringement of their trademarks.

The proceedings arose out of the importation and sale by Elva and Gary Hasluck of pirated DVD films bearing the trademarks of the film studios. The proceedings were not defended by the Haslucks and injunctions were awarded.

The court has now issued a second judgment concerning the proper basis for the assessment of damages for the infringement of the trademarks, in particular in relation to:

• loss of sales;
  
  
• devaluation;
  
  
• loss of reputation; and
  
  
• exemplary damages.

It is worth noting that the judge was clearly not happy with the nature of the evidence that was tendered by the film studios. He described the evidence in the following terms:

"The evidence relating to the DVDs … came in fits and starts. The evidence as to damage was sparse despite the fact that some of it, particularly relating to royalties and/or licence fees, could have been adduced by the studios. The inadequacies of the evidence and the apparent absence of a coherent and principled approach to the question of devaluation has created difficulties in assessment. Those inadequacies … are not to be supplied by speculation or guess work on the part of the court."

These comments perhaps explain why the judge went on to order: (i) nominal damages only of $500 for each studio for lost sales; and (ii) a further $1,000 for each studio for devaluation.

However, the judge was not satisfied that there was any basis for finding that the studios had suffered any loss of reputation as a result of the infringing conduct. Furthermore, the studios' claims for exemplary damages were considered to be unfounded and not available under the Trademarks Act 1995.

Notably, the judge cited and approved the analysis in the UK case of Gerber Garment Technology Inc v Lectra Systems Ltd [1995] RPC 383 in relation to the assessment of damages for the infringement of patents. In that case, the court set out the following principles:

• Damages are compensatory only.
  
  
• The burden of proof lies on the plaintiff but damages are to be assessed liberally.
  
  
• Where a patentee has licensed its patent, the damages are the lost royalty.
  
  
• It is irrelevant that the defendant could have competed lawfully.
  
  
• Where the patentee has exploited its patent by manufacture and sale, it can claim:
  
  
  • lost profit on sales by the defendant it would have made otherwise;
    
    
  • lost profit on its own sales to the extent that it was forced, by the infringement, to reduce its own price; and
    
    
  • a reasonable royalty on sales by the defendant which it would not have made.

The judge in the Paramount Pictures Case treated the Gerber principles as being relevant to the assessment of compensatory damages for trademark infringement under the Trademarks Act.

In this case, the studios also sought exemplary damages. However, there is no provision in the act for exemplary damages to be awarded. Section 126 of the act may be contrasted with Section 115 of the Copyright Act 1968, which makes express provision for "additional damages" in Section 115(4). There is no equivalent to that provision in the Trademarks Act and no authority was cited by the studios for the proposition that exemplary damages are available for trademark infringement. The judge commented that, although not necessarily to be regarded as an anomalous remedy, exemplary damages are nevertheless "unusual". Accordingly, he applied the principle that where a statute creates a remedy by way of damages then, absent specific provision or necessary implication, it should not be read as extending that remedy to exemplary damages.

Julian Gyngell, Solicitor & Attorney, Wahroonga