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Intellectual Property infringement turns UGG-ly

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Deckers Outdoor Corporation Inc. (Deckers) – the owner of the ‘UGG’ brand – was recently awarded over $7.5 million in damages from the sale of counterfeit UGG Boots whereby the intellectual property of Deckers was found to be infringed.  Depending on the factual circumstances, MST can assist its clients in obtaining a similar result when things turn ‘UGG-ly’!

The branding of the UGG Boot incorporates two forms of intellectual property – copyright and trade mark.  Copyright protects the expression of ideas in the form of (eg.) literary or artistic works, whereas trade mark registration protects the sign used by the trade mark owner to distinguish their goods and services from those of other traders.  As trade marks commonly include an artistic work, copyright protection can also be available for trade marks.

Copyright protection arises automatically and does not require registration.  This form of intellectual property protection is particularly beneficial for businesses as copyright infringement proceedings can result in the award of additional damages when the infringement is particularly flagrant (as it was in the circumstances outlined below).  Copyright owners can potentially be compensated far in excess of any damage they may have suffered from the infringing act, with the purpose of additional damages being to punish the infringer and assist the intellectual property owner.

In the current example, Deckers owns a registered trade mark for its UGG Boot product (the ‘Trade Mark’).  The Trade Mark is an image incorporating the words ‘UGG’ and ‘australia‘, together with the image of the sun.  Copyright works associated with the UGG Boot – in the form of the trade mark image, leaflets, pamphlets and packaging (the ‘Copyright Works’) – are also owned by Deckers.

In 2003, Deckers became aware of the defendants advertisement and sale (in both Australia and overseas) of counterfeit UGG Boots using infringing copies of the Trade Mark and Copyright Works.  Deckers commenced trade mark and copyright infringement proceedings against the defendants.  The legal proceedings were subsequently discontinued when the parties entered into a settlement agreement with the defendants being restrained from manufacturing or advertising footwear or accessories which bore the words ‘UGG’, or ‘UGG Australia’ or the image of the sun.

In 2005, the defendants breached the earlier settlement agreement and again began selling counterfeit UGG Boots.  Although a further settlement agreement was entered into (with the defendants agreeing to be restrained), in 2007 it became clear that the defendants were again offering counterfeit UGG boots via the internet (including eBay).  Accordingly, Deckers issued further legal proceedings alleging infringement of the Trade Mark and Copyright Works.

The recent decision of the Federal Court focused on alleged copyright infringement by the defendants.  In describing the circumstances of the case as ‘one of the worst of its kind to come before the Court’, Tracey J awarded over $7.5 million in damages to Deckers (with legal costs of $1 million).  In doing so, his Honour took into account the:

  • estimated loss of profit to Deckers resulting from the sale of the counterfeit UGG Boots (awarding actual damage of $3 million);
  • defendants total disregard of Deckers’ rights;
  • multiple infringing activities of the defendants;
  • significant need to deter and penalise the defendants for their activities (awarding additional damages of $3.5 million); and
  • discretion conferred on the Court to fix an appropriate level of additional damages.

The award of $7.5 million was in addition to other payments already ordered by the Court in respect of the counterfeit activities, including trade mark infringement.

While the above decision was heavily dependant on the particular circumstances, it nonetheless highlights the importance of protecting and enforcing the registered and unregistered intellectual property in your business.  As per the current example, if you become aware of counterfeit versions of your product being sold in the marketplace – particularly over the Christmas Season – MST can assist you with strategies to obtain compensation for the losses you incur.

Contact one of our Intellectual Property lawyers if you would like further information.

Author: Noelene Treloar