Businesses spend often unquantifiable amounts of time and energy in developing intangible assets such as their name, mark and reputation (or goodwill).
Understandably, they are equally protective and swift to act when it appears as though their rights in those assets have been infringed.
The first resort of the aggrieved is often that they want to seek urgent injunctive relief in order to stop, as soon as possible, what they perceive to be a fairly straight forward infringement of their rights. The recent Federal Court decision in the matter of Virgin Enterprises Limited v Virgin Star Pty Ltd highlights the difficulty in obtaining injunctive relief and should serve as a warning to those who would otherwise pursue, bloodhound like, the faint scent of infringement.
Richard Branson and his Virgin Group of Companies have established a worldwide reputation over the last 17 years. They, no doubt quite correctly, consider that they have developed a substantial and valuable reputation in the name and mark "Virgin", and the various enterprises which use the Virgin mark (or variations thereof). In the latter half of 2005, a small trader who specialised in the business of web design and database development commenced using the names "Virginstar" or "Virgin Star". That business was subsequently engaged by a number of (mainly small ) businesses to develop their websites and databases. Virgin Star also promoted themselves by advertising in a national publication, with reference to the domain name www.virginstar.com.au. The website which Virgin Star set up was originally displayed in predominantly red and white colours (as are the Virgin marks), but was subsequently changed to predominantly blue and white colours.
In support of its application for injunctive relief, Virgin argued that Virgin Star was firstly infringing its trade marks, secondly engaging in misleading and deceptive conduct in contravention of s.52 of the Trade Practices Act and thirdly passing off at common law. In the result, the decision highlights the discretionary nature of injunctive relief.
The Court reiterated the principles which govern the grant of an injunction, as outlined by the High Court in Castlemaine Tooheys Limited v South Australia.
That is, in order to obtain an injunction, the applicant must show:
There is a serious question to be tried. The development of the cases confirms that the applicant must establish that he has a case which can be seriously argued at trial or that there is a real prospect of succeeding in a claim for a permanent injunction at trial;?
That he will suffer irreparable injury for which damages will not be an adequate compensation; and
The balance of convenience favours the granting of an injunction.
The second test has often been expressed to be an element of the third.
That is, in assessing whether the balance of convenience favours the granting of an injunction, a Court should consider whether an applicant will be adequately compensated by damages for loss. If so, then the balance of convenience is unlikely to favour the grant of an interlocutory injunction.
In the present matter, the Court found that Virgin had satisfied the "relatively low threshold" which is required of the first limb by establishing that the Virgin name and marks are sufficiently well known to be arguably a source of confusion in some minds at a casual glance. The Court considered that to be the case even though Virgin had not established that Virgin Star was competing with Virgin in the same market, as there did not appear to be a direct overlapping of a significant nature between the goods and services offered by Virgin and those offered by Virgin Star.
In support of its argument that the balance of convenience favoured the granting of an injunction, Virgin argued that it may suffer general loss of reputation in the event of the provision of poor quality services by the respondents which were then associated by consumers with the Virgin brand.
In short, the Court found that Virgin Star had spent a significant amount of time, effort and money in attempting to establish its brand name and that any injury which Virgin might suffer if the injunctions were refused did not outweigh the injury which the respondents would suffer if the injunctions were granted. The Court considered that damages would be a sufficient remedy if Virgin were to succeed at trial. Accordingly, the balance of convenience favoured preserving the status quo until the hearing.
The nature and volume of the evidence filed in interlocutory proceedings, and in particular its probative value, was considered in some detail by the Court. The solicitors for Virgin filed two affidavits, one of 27 pages and the second of 105 pages. However, in addition, over 5,000 pages of material were exhibited to the affidavits, which it appears generally went toward establishing the reputation which Virgin had established.
However, the Court variously described that material as:
an "ocean of unnecessary and unhelpful material". "the manifest lack of relevance of much of the material … borders on vexatious and frivolous use of Court procedure". "Vastly excessive and uncritical assembly of material covering a period of over 17 years". It was said that the evidence did not make it clear with any precision exactly what it is about the reputation of the Virgin Group that would be damaged by the use of the Virgin Star's website and that the material had been reproduced without any real attention given as to whether it is necessary, appropriate or relevant to be an immediate issue for which it is to be used.
The Court further said that "such a pile of information could result in oppression to a litigant who is forced to consider this material in an attempt to meet it at such an early stage of the proceedings" and should be taken into account in relation to costs. On some occasions, it may be necessary to file a large amount of material, particularly if there is a large technical component to the dispute. However, disputes involving a large technical component are also difficult to resolve at an interlocutory stage.
In short, those comments highlight the potential hazards of seeking interlocutory injunctive relief. Many applicants determine the success of their action based on their ability to obtain an interlocutory injunction and to prevent their competition from infringing on their rights at an early stage. However, the process of applying for injunctive relief can be both costly and time consuming. It can detract from and delay the "main game", namely proceeding with a full trial of the matter on the merits.
Relevantly, the Court considered that the prospect of the "dilution" of Virgin's name or the weakening of its reputation was not sufficient to warrant the grant of an injunction on the balance of convenience. Applying first principles, the Court considered that damages would be an adequate remedy in the event that Virgin ultimately succeeded at trial. The situation may have been different if Virgin was able to establish that it would suffer an unquantifiable loss if injunctive relief was not granted, such as were its reputation associated with exclusive, high quality and expensive products within a specific market.
In conclusion, the decision contains a warning to hasten slowly when seeking urgent relief. The value of the brand or the strength of the infringement mean little if the evidence does not support the principles which must be established for the grant of an injunction. The Courts will not readily entertain applications in which the respondent has been flooded by material, particularly where the effect is to suffocate a financially inferior opponent.
Business is always going to want an immediate result where it perceives that its rights are being infringed. In appropriate circumstances, injunctions are an important and effective means of protecting your rights. However, whilst the hounds might easily pick up the faint scent of an urgent remedy, it is easy to become outfoxed if careful consideration is not given to the finer points of an application before setting out in pursuit of injunctive relief.
