Counterfeit tea business boils over into significant additional damages for infringement
Truong Giang Corporation v Quach  FCA 1097 (15 October 2015)
Trade marks – counterfeit goods – respondents manifestly unbelievable – compensatory damages – additional damages
Truong Giang Corporation (TG Corp) manufactures and sells “3 Ballerina Tea” green tea in packaging that features a variety of registered marks, including a device mark featuring three ballerinas. It was not in dispute that TG Corp enjoys a substantial and valuable reputation in Australia in its ballerina mark and the distinctive get up of its packaging (shown below on the left).
Since at least 2011, a counterfeit “3 Ballerina Tea” product has been sold in Australia. Although described as “Dieters’ Drink”, the packaging of the counterfeit product features the ballerina device (shown below on the right). The respondents (Quach, his company New Leaf Tea Pty Ltd, and one of their suppliers, Alexandrou) sell tea, coffee and nut products, including the counterfeit product.
The respondents plainly had trouble brewing: Justice Wigney had no doubt that the Dieters’ Drink get up featured TG Corp’s mark without authorisation, was deceptively similar to that of TG Corp’s product, and was intended to be passed off as the same. Quach and Alexandrou sought to downplay the extent and duration of their sales of infringing products and claimed ignorance as to their counterfeit nature, but their credibility evaporated in the face of compelling circumstantial evidence to the contrary. Overall, the Court found them to be “manifestly unbelievable”, and unsurprisingly held that trade mark infringement, misleading and deceptive conduct, and passing off had been made out.
Quach also was held to be personally liable for the wrongdoing of New Leaf. Justice Wigney noted that whatever the correct test for joint tortfeasance might ultimately prove to be (alluding to the various tests espoused in decisions such as Keller v LED Technologies Pty Ltd (2010) 185 FCR 449), Quach had made New Leaf’s torts “his own” and used New Leaf as an “instrument for his wrongdoing”.
Among the usual catalogue of relief sought (and obtained), TG Corp elected to seek damages. Based on a decline in sales since 2011, on a “loss of profit” basis (see, e.g., Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd (2009) 81 IPR 378), TG Corp established a loss of around US$2,700. TG Corp sought to increase that figure to $80,000, however, in light of the respondents’ inadequate discovery and unsatisfactory evidence and the likelihood that the true extent of their conduct extended beyond that which TG Corp was able to prove. His Honour allowed $3,500 in compensatory damages, but otherwise rejected TG Corp’s submission, as the respondents appeared to be “middle men” and not the producers or importers of the infringing goods, and the suggestion that their sales were greater than had been disclosed had not been put to them. Accordingly, there was insufficient basis for the Court to speculate that the respondents’ conduct had boiled over into a significantly higher number of additional sales.
His Honour’s award of additional damages under section 126(2) of the Act was more generous (but still only around one third of those sought by TG Corp): $50,000 as against Quach and New Leaf; and $25,000 as against Alexandrou. His Honour did not separately award exemplary damages for passing off, as he held that any such damages “would be the same as the additional damages assessed as payable in respect of the trade mark infringements”.
It should also be noted that the respondents’ legal defence appears to have run out of steam at the hearing stage, as they were unrepresented. Even so, the case illustrates the pitfalls of even a straightforward infringement claim where compensatory damages are sought in respect of counterfeit goods. Further, had the respondents not been so blatantly aware of the nature of the goods and at pains to downplay their conduct, the award of additional damages might not have mitigated the low level of compensatory damages as much as it did in this case.