Unjustified threat damages awarded for the first time in design case

In World of Technologies (Aust) Pty Ltd v Tempo (Aust) Pty Ltd, the Federal Court of Australia has handed down a decision in which, for the first time, damages were awarded against an Australian company that had made what was found to be an unjustified threat of design infringement against a competitor.

Under the Australian Designs Act 2003, a person against whom a threat of design infringement proceedings is made can apply to a court for:

• a declaration that the threat was unjustified;
  
  
• an injunction against the continuation of the threat; and
  
  
• the recovery of damages sustained as a result of the threat.

The Designs Act provides that a threat to bring infringement proceedings in respect of a design at a time when a certificate of examination has not been issued for the design is unjustified.

The case involved a dispute between two Australian importers and wholesalers of electrical appliances in relation to a bagless vacuum cleaner manufactured in China. The applicant, World of Technologies (Aust) Pty Ltd, claimed to have the exclusive distribution rights for the vacuum cleaner in Australia and secured registration of the design of the vacuum cleaner under the Designs Act.

World of Technologies sued the respondent, Tempo (Aust) Pty Ltd, alleging that Tempo had:

• infringed World of Technologies' registered design;
  
  
• induced a breach of the contract between World of Technologies and the Chinese
  manufacturer of the vacuum cleaner; and
  
  
• engaged in conduct which was in contravention of prohibitions against misleading and deceptive conduct under the Australian Trade Practices Act 1974.

Tempo defended the claims and also brought a cross-claim against World of Technologies, seeking revocation of the registered design on the basis that (i) it was not new, original or distinctive at the priority date, and/or (ii) World of Technologies was not entitled to procure the registration of the design. It also claimed for damages arising from a letter of demand which World of Technologies had sent to Tempo prior to the commencement of proceedings and which Tempo claimed constituted an unjustified threat of infringement proceedings.

World of Technologies ultimately abandoned its claims for design infringement and breach of the Trade Practices Act.

The court's ruling included the following points:

• It dismissed the claim that Tempo had committed the tort of inducing a breach of contract, on the basis that there was no relevant contract between World of Technologies and the Chinese manufacturer but even if there had been, Tempo lacked the required intention to support a claim of inducement.
  
  
• In light of a number of brochures which depicted the appearance of the relevant vacuum cleaner and which were published prior to the date of application for registration of the design, the design was not distinctive when compared with the prior art base as it existed before the priority date and thus was not a registrable design for the purpose of the Designs Act.
  
  
• World of Technologies was not entitled to be registered as the owner of the design, as it was neither the actual designer nor a person who had derived title to the design from the original designer. Further, it was not entitled to have the exclusive rights in the design assigned to it. Accordingly the design was liable to be revoked.
  
  
• The court upheld Tempo's claim that World of Technologies had made an unjustified threat of design infringement because, at the time it sent the letter of demand, a certificate of examination had not been issued in respect of the registered design. The award of damages to Tempo in the sum of A$213,059.96 was calculated in circumstances where, having received the letter of demand, Tempo (i) cancelled an order which it had previously placed with the Chinese manufacturer for 15,000 vacuum cleaners, causing a lost profit of A$126,231.38, (ii) and kept itself out of the market for 11 months. Although the court expressed concerns about the nature of the evidence on which Tempo sought to rely in assessing this loss, the court adopted what it described as a "conservative approach" and concluded that, on the probabilities, Tempo had suffered a loss of A$86,828.58, which was equivalent to the gross profit that it would have made from the sale of 15,000 units of the vacuum cleaners during the relevant period.

Miriam Stiel, Allens Arthur Robinson, Sydney