Repeat IP infringer successfully obtains reduced sentence for contempt

Peter Heerey AM, QC, Tom Cordiner & Alan Nash
Correspondents for South Australia, Victoria and Western Australia

Note: Where any of the barristers were involved in a case reported below and the matter is still running, or potentially so, the other correspondents have taken the role of reporting that case.

Vaysman v Deckers Outdoor Corporation Inc [2014] FCAFC 60 22 May 2014

This was an appeal from the ultimate disposition at first instance of Deckers’ successful copyright and trade mark infringement claims against various respondents in respect of their use of various UGG marks and the manufacture and sale of counterfeit UGG boots. 

The appellant, Vaysman, was a repeat offender.  When Deckers originally initiated infringement proceedings in 2003, he had consented to restraining orders and ultimately settled those proceedings, but continued to deal in counterfeit products.  When detected and sued for a second time in 2004, he consented to further restraining orders but after a short time recommenced manufacture and sale of counterfeit products, this time on a much larger scale.  When discovered for a third time in 2007, Vaysman gave undertakings to the Court, but also gave false evidence as to the extent of his infringing conduct since 2005 and then carried on “business as usual as if nothing had happened”.

Deckers brought contempt charges against Vaysman, which were heard in mid 2008.  Before judgment was delivered, Vaysman consented to judgment in the amount of $3 million as general compensatory damages, and in the further amount of $3 million as additional damages for breach of copyright.  By that stage, however, he had moved overseas and soon afterwards went into voluntary bankruptcy.

On 23 April 2010, Justice Tracey delivered judgment on the contempt charges, finding that ten counts of contempt of court had been proven.  The most significant of these was charge 18 in respect of the period from late 2005 to late 2007, in which over 30,000 pairs of counterfeit boots were sold for a profit of over $3 million.  His Honour noted (repeatedly) that it was “one of the worst cases of contempt” to have come before the Court and observed, “It is probably too generous to describe it as “flagrant”.  General deterrence must be a significant consideration.”  Charge 18 attracted a sentenced of three years’ imprisonment; on the other counts, Tracey J imposed periods of imprisonment of between seven days and six months, all sentences to be served concurrently.

Vaysman stayed overseas until mid 2013; his solicitor gave evidence that this was largely due to his being unable to face his financial woes and the prospect of imprisonment.  Upon his return he was imprisoned, and sought to appeal the findings of contempt made against him.  Leave to appeal out of time was granted by the Full Court; according to Justice Besanko (Dowsett and Siopsis JJ agreeing) this is primarily because the appeal had some merit.

The only grounds of appeal on which Vaysman enjoyed success were to the effect that the sentence of three years was manifestly excessive.  Justice Besanko (Siopsis J agreeing) considered that in reviewing a sentence for contempt, it was appropriate to consider “comparable” cases as a yardstick (although truly comparable cases might be difficult to find), but also bearing in mind that “it is always open to a court on appeal to reset what might until then have been considered the prevailing tariff.”  On that basis, three years was manifestly excessive compared to sentences of not more than 12 months imposed in “comparable” cases.  Vaysman’s conduct nevertheless was very serious, and the majority were only prepared to reduce his sentence to two years.

Justice Besanko rejected Vaysman’s ground of appeal to the effect that the learned trial judge had failed to take into account as a relevant consideration the fact that punishment had already been imposed on him (at least in part) for the relevant conduct in the form of the order for additional damages.  This was said to amount to double punishment.  His Honour held, however, that any failure by the learned trial judge to consider the additional damages award was insubstantial in the present case, given Vaysman’s departure overseas and voluntary bankruptcy; the order to pay additional damages was not “effective punishment” for Vaysman’s failure to comply with the Court orders.

Justice Dowsett arrived at almost the same outcome, but by a different route.  His Honour was not satisfied that the three year sentence was manifestly excessive, given Vaysman’s persistent and substantial commercial conduct over a protracted period and the absence of any compelling expression of remorse.  However, his Honour felt there was some merit to Vaysman’s arguments as to “double punishment”.  His Honour held that in the present case, the award of additional damages was for the purpose of punishing Vaysman, and deterring him and others from the infringing conduct.  Further, Vaysman’s bankruptcy did not necessarily deprive the award of additional damages of its punitive nature; “An award of damages which leads to bankruptcy may be as much a deterrent as an award which is paid.”  Accordingly, his Honour would have been inclined to reduce the sentence to two years and three months (and allow the final nine months to be suspended for five years pending no further infringing conduct by Vaysman).

Peter Heerey QC – CommBar profile

Alan Nash – CommBar profile

Tom Cordiner – CommBar profile

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