Additional damages for trade mark infringement?
Tuesday 18th October 2016
To comply with the Trans-Pacific Partnership Agreement (TPPA), Parliament has introduced a new Bill that includes a provision for additional damages as a remedy for trade mark infringement. This article discusses additional damages – what they are, the New Zealand and Australian courts’ approach to awarding them, and how additional damages may become a remedy available for trade mark infringement in New Zealand.
What are additional damages?
Like the existing provisions for additional damages in the New Zealand Copyright Act 1994 and the Layout Designs Act, the Bill  does not include a statutory definition for “additional damages” in the trade mark context. Instead, and consistent with existing legislation, the proposed subsection provides that the court may grant additional damages as the justice of the case requires, having regard to all the circumstances of the case and in particular to the flagrancy of the infringement and any benefit that accrues to the defendant due to the infringement.
So, what are additional damages? Case law in New Zealand and Australia has found that additional damages are exemplary or punitive in nature and are also intended to act as a deterrent. They are awarded in cases where the infringer has gone beyond merely being aware of infringement and has instead acted flagrantly. Importantly, additional damages are available in addition to compensatory damages, but do not need to be linked in quantum to any award of compensatory damages. Additional damages are therefore valuable in cases where ordinary compensation is not an adequate remedy.
Awards of additional damages in New Zealand and Australia
In Skids Programme Management Ltd v McNeill,  a former owner of a childcare business deliberately and extensively copied manuals. The New Zealand Court of Appeal awarded NZ$2,000 in compensation (being the cost to replace the manuals) and NZ$20,000 additional damages. The additional damages award was based on the defendant’s conduct right up until judgment.  It was significant that the Court found the defendant had lied under oath.
Australia introduced a remedy for additional damages for trade mark infringement in 2013. The Federal Court first considered the new section in Halal Certification Authority Pty Limited v Scadilone Pty Limited.  In that case, a wholesaler of kebabs and two kebab shops used the Halal Certification Society’s trade mark without authorisation and falsely represented that their kebabs were certified as halal. The plaintiff was awarded a mere AU$10 in compensation. As a deterrent, however, the court awarded additional damages of AU$91,015. This was calculated as the fees the defendants would have paid, if certified by the HCA over the relevant period, increased by 50%.
Since the Halal Certification Authority case, several Australian cases have awarded the plaintiff in excess of AU$100,000 in additional damages in copyright or trade mark infringement cases,  with the high water mark in Australia being the copyright case of Microsoft Corporation v Ezy Loans Pty Ltd.  There, the Federal Court awarded AU$240,625 in compensatory damages based on a license fee for Microsoft’s software. The Federal Court also awarded AU$350,000 in additional damages based on the flagrancy of the defendant’s conduct and because the defendants obtained a significant benefit.
New Zealand appears to be following Australia’s lead. In Jeanswest Corporation (New Zealand) v G-Star Raw CV.  the Court of Appeal found that Jeanswest had flagrantly copied G-Star’s design for a pair of jeans and, while only 63 pairs of jeans were sold, there was a possibility of significant future sales. In determining the quantum for additional damages, the Court considered the awards made in Skids and similar Australian decisions in the copyright and trade mark context and settled on a NZ$50,000 award of additional damages.
Jeanswest represents the current high water mark for additional damages in New Zealand. The consideration of Australian case law indicates that the courts see the same principles applying in both trade mark and copyright cases.
Additional damages under the New Zealand Trade Marks Act 2002?
The United States has yet to ratify the TPPA. In the likely event that it is not ratified during the Obama administration, it is possible that it will not be ratified at all in its current form, both Trump and Clinton having signalled their opposition to the current TPPA. If the United States does not ratify TPPA, New Zealand’s Bill may be stalled or defeated.
However, it is possible that Parliament might pass an equivalent provision for additional damages in any case. This would be a logical step to harmonise New Zealand and Australian trade mark law, and would be consistent with the courts’ reliance on Australian jurisprudence when determining claims for additional damages in New Zealand.
If the Bill or an equivalent additional damages provision is enacted for trade mark infringement, the remedy will be a valuable tool in cases like the Halal Certification Authority case, where the traditional remedies of compensatory damages or account of profits are inadequate.
This article is intended to summarise potentially complicated legal issues, and is not intended to be a substitute for individual legal advice. If you would like further information, please contact a Baldwins representative.
 The TransPacific Partnership Agreement Amendment Bill.
 Section 121(2) of the Copyright Act 1994 provides “In proceedings for infringement of copyright, the court may, having regard to all the circumstances and in particular to (a) the flagrancy of the infringement; and
(b) any benefit accruing to the defendant by reason of the infringement, award such additional damages as the justice of the case may require.”
 Electroquip Ltd v Craigco Ltd (No 2) HC Auckland CIV-2006-404-6719, 29 April 2010.
 Skids Programme Management Ltd v McNeill  1 NZLR 1 (CA).
 Skids Programme Management Ltd v McNeill  1 NZLR 1, 
 Section 126(2) of the Trade Marks Act 1995.
 Halal Certification Authority Pty Limited v Scadilone Pty Limited  FCA 614.
 Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd  FCA 633,(AUD$150,000); Seafolly Pty Ltd v Fewstone Pty Ltd  FCA 321 (AUD$150,000); Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq)  FCA 40 (AU$200,000).
 Microsoft Corporation v Ezy Loans Pty Ltd (2004) 63 IPR 54 (FCA).
 Jeanswest Corporation (New Zealand) v G-Star Raw CV  NZCA 14.