Earlier this year, in Veda Advantage Limited v Malouf Group Enterprises Pty Limited [2016] FCA 255, Justice Katzmann of the Federal Court considered the issue of trade mark infringement and breach of the Australian Consumer Law by Malouf Group Enterprises Pty Limited (Malouf). Here, a Google AdWords campaign used Veda Advantage Limited’s (Veda) trade mark “veda”. On 5 May 2016, Justice Katzmann revisited the issue after parties failed to agree on proposed orders resulting from her initial judgement. While the parties agreed on declarations to be made based on her Honour’s findings, two issues remained in dispute:

  1. Whether the Court should order injunctive relief; and
  2. What costs, if any, should Malouf be ordered to pay.

Justice Katzmann’s judgement provides some useful lessons regarding what relief parties can expect, and that parties should maintain realistic expectations about this relief. 

Veda v Malouf (No 1)

Veda is the major credit reporting organisation in Australia, and owner of several registered trade marks in class 36 (amongst others):

Veda’s allegations against Malouf were relatively straightforward. Firstly, Veda claimed that by using the word “veda” in Google Adwords campaigns and its paid advertisements, Malouf had:

  • Infringed Veda’s trade marks in contravention of section 120 of the Trade Marks Act 1995; and
  • Engaged in misleading or deceptive conduct in contravention of section 18 of the Australian Consumer Law;
  • Falsely misrepresented that its goods and/or services had “a sponsorship, approval or affiliation” with Veda in contravention of section 29(1)(h) of the Australian Consumer Law; and
  • Falsely misrepresented the price of its services in contravention of section 29(1)(i) of the Australian Consumer Law.

Veda was only to a limited extent successful in these allegations. Justice Katzmann’s judgment is worthy of in-depth analysis in its own right. In short, however, her Honour found that Malouf’s conduct constituted trade mark infringement and contravened Australian Consumer Law only to the extent that Malouf used the expression “The Veda Report Centre” in the text of the sponsored links displayed in Google search results. Her Honour left the parties to agree to the orders that should be made based on her findings.

Veda v Malouf (No 2)

Given two weeks to negotiate the orders, the parties failed to reach an agreement. While Veda and Malouf agreed on the declarations the Court would make, the parties disagreed as to whether an injunction should be ordered, and what costs, if any, Malouf should be ordered to pay.

Firstly, Malouf argued that injunctive relief was not required. Veda, however, disagreed. While Malouf was willing to and did provide an undertaking to the effect that it would ‘not use the phrase “The Veda Report Centre” in any sponsored link”, Veda argued this would be a small comfort and that a Court-ordered injunction would ensure Malouf’s compliance. Secondly, Veda maintained that Malouf should pay 30% of Veda’s costs, presumably commensurate with the extent of their successful claims. Conversely, Malouf maintained that it should not have to pay any of Veda’s costs, and indeed, given that Veda’s success was very limited, and that no award of damages or account of profits was made, that Veda should have to pay Malouf’s costs on an indemnity basis.

Injunctive Relief

During the trial, Malouf’s sole director, Jordan Malouf, provided the following undertaking:

Without any admission as to liability, I undertake on behalf of Malouf Group that it will not use the phrase “The Veda Report Centre” in any sponsored link.

Veda wanted something a little more comprehensive and sought to restrain Malouf permanently from using in its sponsored link advertising the phrase “THE VEDA REPORT CENTRE” or “THE VEDA-REPORT CENTRE”.

Malouf argued that its undertaking should be a sufficient replacement for the above injunctive relief. While the risk of Malouf engaging in further infringing conduct was considered low, Justice Katzmann noted that:

  • Malouf commenced use of the phrase “THE VEDA REPORT CENTRE” after receiving Veda’s initial cease and desist letter;
  • The undertaking given was couched in narrow terms;
  • It is in the public interest that the injunction is granted, so as to “mark the Court’s disapproval of [Malouf’s] conduct”.

On this basis, her Honour agreed to the injunctive relief sought by Veda. While a small victory, considering Veda’s failure to make out the majority of its initial claims, it serves to demonstrate to parties accused of infringement that undertakings given should satisfy the aggrieved party’s concern about the continuation of the infringing conduct. Failure to do so may not just draw the ire of the other party, but also that of the Court.

Costs

In seeking an award of costs in its favour, Malouf provided evidence of its settlement offers made to Veda under the principles of Calderbank v Calderbank [1975] 3 All ER 333. Each offer was left open for one week. The first offer proposed to discontinue the proceedings and the parties bear their own costs.

The second offer suggested that Malouf refrains from using any of Veda’s trade marks in the text of sponsored link advertisements and that Veda pays Malouf’s costs on a solicitor and own client basis. Consequently, Veda would be required to pay all of Malouf’s costs on an indemnity basis. Interestingly, Justice Katzmann described this offer as ‘bold’, given that Veda was at least partially, successful.

Veda’s offer of compromise proposed that Malouf agrees to Court orders restraining Malouf’s use of the Veda trade marks in the text of Google Search Engine advertising to a limited extent and that each party would bear their own costs.

The Court acknowledged that Malouf’s second offer did in some respects appear more favourable than the outcome achieved by Veda. Her Honour, however, assessed the reasonableness of Malouf’s offer per the factors listed in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 (at [25]):

  • The stage of the proceeding when the offer was made;
  • The time afforded to the offeree to consider the offer;
  • The extent of compromise involved;
  • The offeree’s prospects of success, assessed as at the date of the offer;
  • The clarity with which the terms of the offer were expressed;
  • Whether the offer foreshadowed an application for indemnity costs in the event of refusal.

Problems with Malouf’s Offer

Despite being a ‘Calderbank’ offer, and Veda (arguably) not achieving a more favourable outcome than that proposed by Malouf’s, there were several problems with Malouf’s offer, providing Veda with strong grounds to reject it.

Firstly, Veda had a week to accept the offer and Malouf made his offer at an early stage in the litigation, before discovery. Veda was not in a position to determine the full extent of Malouf’s use of its trade marks and so the case against Malouf. Justice Katzmann held a week for Veda to consider Malouf’s offer insufficient. Secondly, the offer was not expressed in clear terms, as it proposed that Malouf would not engage in conduct it alleged it had engaged in anyway. Unsurprisingly, this was of little value to Veda. Lastly, the issues in contention were not (at the time of the offer) settled matters of law in Australia, and from Veda’s perspective, there was a significant prospect that it would be more successful in its claims than it was. Given these factors, her Honour held that it was not unreasonable for Veda to reject Malouf’s offer.

Costs Indemnity?

Malouf also claimed that Veda’s proceedings against Malouf were, in effect, a ‘test case’, and that given its modest success, Veda should be required to pay Malouf’s costs.

Applying Oshlack v Richmond River Council (1998) 193 CLR 72, her Honour held that Malouf’s contention that Veda had unnecessarily protracted the proceedings was not made out. Accordingly, Veda was entitled to recover its costs to the limited extent it was successful in its claims, which her Honour assessed as being 20%.

Lessons for Disputing Parties

Veda v Malouf (No 2) provides a number of lessons for both successful and unsuccessful disputing parties:

  • Undertakings proposed either before or during proceedings should be sufficiently clear and comprehensive enough to satisfy the recipient of the undertakings that they would not be better off with a Court ordered injunction.
  • When providing a settlement offer, parties must ensure that:
    • The other party has reasonable time to consider the offer, having regard to the stage of and nature of the proceedings; and
    • The offer is clearly expressed, and satisfies the other party’s concerns about any alleged infringement of their rights. 
  • Rejecting a Calderbank offer and failing to obtain a more favourable result does not automatically lead to a costs award made against the recipient. The offeror must still show that it would be unreasonable for the recipient to reject the offer.

Questions? Get in touch with our disputes lawyers on 1300 544 755.

Daniel Smith

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