Tuesday, January 6, 2015

Hugo Boss v Sasalili Oxford Fia: The Strategy of Policing Luxury Brands

The Federal Court of Australia has recently awarded both compensatory and additional damages in the Hugo Boss Trade Mark Management GmbH & Co Kg v Sasalili Oxford Fia case. Exemplary damages were introduced into the Australian Trade Marks Act in April 2013.

The applicant in this case was Hugo Boss Trade Mark Management GmbH & Co Kg, the trade mark vehicle of the famous German luxury fashion and style house. The respondent was Sasalili Oxford Fia, which has been manufacturing and offering a range of men’s, children’s, and women’s apparel bearing the mark BOSSIT, with the logo bearing a resemblance to Hugo Boss’ logo.

The BOSSIT-branded items were being sold primarily online (through a Facebook page serving as an online store) and were also sold in several local markets such as the Fairfield and Blacktown markets.

When the case first went to trial in early 2014, the Court had ordered the respondents to pay the applicant for infringing the Hugo Boss trade mark. Applicants successful on the issue of liability can elect to seek damages or an account of profits. The applicant chose damages. This is hardly unusual: respondents often claim that their expenses are such that they made no profit. An account of profits also excludes a claim for exemplary damages, which is largely a discretionary award.

Middleton J awarded additional damages after being presented evidence that the respondents continued selling the infringing products even after receiving the applicant’s cease and desist letter. Additionally, His Honour also took into account that the respondent’s products were of inferior quality, manufactured and sold through means that Hugo Boss would never have done themselves, much less approved of. The final compensatory damages awarded by the courts is $20,000 for infringement of Hugo Boss’ trade marks, plus $10,000 and $15,223.53 additional damages and costs of proceedings incurred by the applicant, respectively.

The Court considered the award of damages fair and a good deterrent to entities that would seek to engage in infringing activities in the Australian marketplace. These sort of skirmishes with small infringers inevitably cost more than is recovered, but are generally considered necessary by luxury brands to deter others.

This matter reminds me of a case I was involved in when I worked in Hong Kong: Montres Rolex S.A. v. Tsoi Chi Li [2001] HKCFI 996; HCMP 361/2001 (21 September 2001). In that case, the Defendant breached orders of the court relating to the cessation of his sale of fake Roles watches. The defendant was sentenced to three months’ imprisonment. On the issue of costs, the Court said:



“This is my gross assessment of the costs of the application which is sought by the plaintiffs Rolex Company against Mr Tsoi in relation to the application for contempt that had been successfully brought by the plaintiffs against Mr Tsoi. This has been a very heavy matter. It has taken a large number of days. Meticulous care had been taken by everyone to ensure that a fair hearing has been given to Mr Tsoi. A lot of work have been done. I had been greatly assisted by the able work of the solicitors and counsel for the plaintiffs. The amount of costs sought is in the total sum of $1.2 million. It is a very large sum. On the other hand, it is a fairly unusual case with accumulation of a great deal of work and certainly many, many weeks of work recently resulting in today's final judgment. The costs of the plaintiffs in the case such as this justify an order on an indemnity basis. The plaintiffs had been put to great expenses and trouble. The manager of the plaintiffs on two different occasions has to come and give evidence for the court, former solicitors of the plaintiffs had to come to give evidence to the court. Mr Tsoi had taken great trouble to dispute, as he was entitled to do, the alleged breaches of the two Orders. I consider in all the circumstances therefore that the plaintiffs deserve to be compensated properly for the costs they had incurred. The gross sum assessment that I made therefore is in the full sum of $1.2 million sought by the plaintiffs. Mr Tsoi has a period of three months to make the payment.”

This order for HKD1.2 million was very significant and designed to compensate Rolex for the expense of the litigation. More to the point, great effort was made by Rolex to have the matter picked up by Hong Kong newspapers, so as to spread the word about the possible consequences of selling counterfeit Rolex watches. Most of the benefit from such disputes does not come from the award of damages and costs: most of it comes from the deterrent effect caused by the publicity.

(I should add, in the interests of transparency, that I was involved in policing the Hugo Boss brand from 2001-2003 until my return to Australia from Hong Kong.)

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