Not so HEFTY account of profits
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In Intellectual Property Development Corporation Pty Ltd v Primary Distributors New Zealand (CIV-2006-404-4695, April 24 2008), the Auckland High Court has allowed in part a claim for an account of profits for the unlawful sale of products bearing the trademark HEFTY.
Intellectual Property Development Corporation Pty Ltd (IPDC) is the proprietor of the trademark HEFTY in respect of cling wrap, among other things. IPDC claimed that Primary Distributors New Zealand infringed its trademark rights by actively marketing products under the brand Hefty in New Zealand. Primary Distributors accepted that its actions infringed IPDC’s trademark rights, but objected to the account of profits remedy sought by IPDC.
Primary Distributors had used the HEFTY mark extensively, having been the exclusive distributor of the Hefty range since the mid-1990s. In April 2003 Cartigny - the company which owned the rights in the HEFTY mark at that time - was placed into liquidation. On March 31 2005 Primary Distributors entered into a three-month licensing agreement to sell out the stocks of HEFTY-marked goods. In April 2005 Primary Distributors mounted a bid to purchase the rights in the HEFTY mark. The bid was never formally rejected and Primary Distributors continued to market and sell HEFTY-marked products in New Zealand. Cartigny sold the rights in the HEFTY mark to IPDC in October 2005.
On January 18 2006 email correspondence took place between IPDC and Primary Distributors. These emails contained reference to the fact that the Hefty brand was still being used in New Zealand. In July 2006 IPDC wrote to Primary Distributors demanding that it cease selling HEFTY-marked products. Primary Distributors claimed that as IPDC had known that it was selling HEFTY-marked goods and had let it do so, it was not entitled to an account of profits.
The Auckland High Court found that as a result of the January 2006 correspondence, IPDC had become aware that Primary Distributors was still selling products bearing the HEFTY mark.
The court agreed that a plaintiff cannot permit a defendant to make profits over a period of years and subsequently expect to claim those profits. The court ruled that an account of profits was not available for the period between January and July 2006, as IPDC was aware of Primary Distributors' acts but did not take any action.
Primary Distributors went on to argue that acquiescence, waiver and laches prevented IPDC from claiming an account of profits at all. The court ruled that IPDC's actions were a mere delay and not assent; therefore, acquiescence was not made out. The court also held that the delay was not long enough to amount to laches and that IPDC had not waived its rights.
On the evidence, the court concluded that Primary Distributors had made out - in part - its equitable defence to IPDC’s claim for an account of profits. However, it had failed to establish acquiescence and the related equitable defences.
The court left it to the parties to calculate the account of profits, with leave to return to court if they could not resolve the issue between themselves.
Kate Duckworth, Baldwins, Wellington
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