Wednesday, August 6, 2014

Halal Certification Authority Pty Limited v Scadilone Pty Limited

Followers of Islam are forbidden from eating food that is not halal, which means the food and every ingredient used was prepared according to the commandments found in the Q’uran, Islam’s holy book, as well as in the Hadith and Sunnah (each being libraries cataloguing things that the Prophet Muhammad said and did), unless there is no alternative and the situation makes it necessary to consume things that are otherwise unlawful.

As with most religions, there is tendency for the written word to be interpreted differently by different groups or people. This is especially true with halal food. In addition, religious leaders sometimes issue edicts that extend these halal requirements. Also, modern food products can be complex, made up of various ingredients that may or may not contain haram (unlawful, forbidden) ingredients like blood or swine.

To help this problem, there are various certification bodies that have been created specifically to identify and label food products as halal, making it easier for Muslims to ensure that the food products they consume are safe to eat. One of these certification bodies in Australia is the Halal Certification Authority ("HCA"), which provides a seal (a registered trade mark) to companies that have proven that their products comply with halal requirements, and have paid licensing fees.

The HCA recently commenced a trade mark infringement case in Australia against several kebab shops – Scadilone and two others that it supplied with products, White Heaven, and Quality Kebabs. The HCA sought compensatory damages based on lost license fees – around $5000 for a year’s worth of license from each of the shops, with Quality Kebabs being asked for $60,000 because its conduct has occurred over parts of two different annual licensing periods.

According to HCA, Quality Kebabs’ sales representative allegedly provided Scadilone and White Heaven with certificates bearing HCA’s trade mark, allowing them to promote their goods as halal, even though Quality Kebabs itself was not certified by HCA nor paid any of the license fees. The issue in this case was not whether Quality Kebab’s products are compliant with halal standards, but that it used HCA’s certificates – incorporating a registered trade mark – without getting express permission or paying for the license fees.

The court found that it was unlikely that any of the infringers would have acquired a license given the quantum of HCA's fees, so there were no likely “lost” license fees. The court also noted that had Quality Kebabs been aware that HCA’s trade mark was registered and license fees were payable, it would not have used the trade mark in the first place and would have found an alternative certificate. The court deemed that HCA had not been deprived of its license fee.

The signs bearing HCA’s registered trade marks were only displayed by two shops for limited periods and no evidence was put forward proving that consumers were exposed to the signs. Additionally, both Scadilone and White Heaven only put up the certificates they were given and promptly removed the certificates once they each received complaints from HCA. They were found to be innocent infringers and were found not liable for additional damages.

The court regarded Quality Kebabs as a different case, though. A reasonable case was found for an award of additional damages. In the court's (Perram J’s) words:

"…. If the damages were to be fixed at the level of the applicant’s wholesale licence fee this would strip Quality Kebabs of the benefit it has received of using the trade mark without having to pay for it but it would not, in my opinion, be a sufficient deterrent. It would mean that an infringer could acquire, in effect, a compulsory licence to use a trade mark subject only to paying for it. It would create a ‘use now’ and ‘pay later’ state of affairs. That situation would eliminate the capacity of the trade mark owner to control who used its trade mark."

In order to serve as a deterrent and in order to address the other factors, the court increased the damages sought from Quality Kebabs to a factor of 50% over the applicable license fees, for a total of $60,000 ($30,000 per year for a period of 2 years) plus an additional $30,000.

The court found that there was no evidence that HCA’s reputation was damaged by the infringement, so no damages were awarded for misleading and deceptive conduct under the Australian Consumer Law.

The decision utilises the new punitive damages award inserted into the Australian Trade Marks Act by way of the Raising the Bar amendments which took effect in April 2013. On a personal note, I was counsel in the decision of Paramount Pictures v Hasluck (2006) 70 IPR 293 which established that, as at that time, punitive damages were not available for flagrant trade mark infringement. The Raising the Bar amendments made it plain that punitive damages are now available, another arrow in the quiver of those on the receiving end of recidivist behaviour or blatant disregard of trade mark rights.

1 comment:

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