By Helen Paterson, Emily Hawcroft and John Fairbairn
A recent decision of the Federal Court provides a cautionary tale for persons tempted to make allegations of intellectual property infringement, including via personal social media posts.
In Seafolly Pty Ltd v Madden [2012] FCA 1346 the Federal Court found that Leah Madden, the principal of the swimwear label White Sands, had engaged in misleading and deceptive conduct by posting Facebook statements and sending emails representing that Seafolly, a competing swimwear brand had copied her designs.
Madden's statements
Madden posted various comments, both on her personal Facebook page and the White Sands Facebook page, suggesting that Seafolly had copied her swimwear designs by sending someone to pose as a buyer and take photos of the swimwear. Examples of these comments include:
- 'Seriously, almost an entire line-line ripoff of my Shipwrecked collection'; and
- 'Ripping off is always going to happen, but sending in a dummy 'buyer' to get photos is super sneaky!'
Madden also posted an album on her personal Facebook page headed 'The most sincere form of flattery?' which contained 8 photos of models wearing Seafolly swimwear appearing alongside photos of models wearing White Sands swimwear. Each pair of photos had the caption 'White Sands as seen at RAFW in May – Seafolly September 2010' or 'White Sands 2009 – Seafolly 2010'.
Madden then sent an e-mail to certain news and fashion publications with the subject 'The most sincere form of flattery?' followed by 'Is it just us, or has Seafolly taken a little to [sic] much 'inspiration' from White Sands?' This email contained the 8 comparison photos posted on Madden's personal Facebook page.
These statements were made in circumstances where, in fact, the evidence showed that the Seafolly garments were either already on the market or in the process of being designed prior to the buyer taking photos of the White Sands swimwear.
Claims
Seafolly sued Madden claiming:
- misleading and deceptive conduct and false representations;
- injurious falsehood; and
- copyright infringement arising out of Madden's posting of photographs of Seafolly's range.
Seafolly could not rely on defamation laws given the operation of uniform defamation laws, which prevent companies (other than non-profit organisations or small businesses) from suing for defamation.
Injurious falsehood and copyright infringement
Seafolly's claim for injurious falsehood failed as it did not provide adequate evidence of actual economic loss suffered by it. The copyright infringement claim also failed as Seafolly did not own the copyright in the photos of the swimwear at the relevant time (which was assigned to Seafolly after Madden posted the photos).
Seafolly had sought general damages of $500,000 and additional damages of $500,000 for the alleged copyright infringement. Tracey J stated that, had it been necessary to consider damages for copyright infringement, the quantum claimed was 'grossly excessive in the circumstances', particularly given that the photos were only displayed on Facebook for a short time and there was no evidence of actual damage flowing from their use.
Misleading and deceptive conduct and false representations
The claim for misleading and deceptive conduct and false representations was brought under sections 52 and 53(a) of the Trade Practices Act 1974 (Cth) as the relevant conduct occurred before the commencement of the present Competition and Consumer Act 2010 (Cth).
Seafolly argued that Madden's statements were misleading and deceptive as they falsely represented that Seafolly had copied Madden's swimwear designs, that Seafolly was not the creator of the original Seafolly designs and that Seafolly had used underhanded means to obtain photos of the White Sands swimwear.
In reply, Madden argued that:
- she did not contend that Seafolly copied her swimwear designs; and
- her statements were merely expressions of her opinion and not statements of fact.
Tracey J rejected these arguments. His Honour found that Madden's language was intended to and did convey to her readers that Seafolly had, as a matter of fact, copied her swimwear designs and that this copying had been made possible by Seafolly's access to the photos taken by the buyer. In light of the evidence that the Seafolly garments predated those of White Sands, Madden's statements were false.
In relation to Madden's expression of opinion arguments, his Honour noted that the relevant consideration was the readers' perception of the statement, not the subjective purpose of the maker of the statement. In addition, his Honour stated that expressing an opinion could contravene section 52 if that opinion was not honestly made. Applying these considerations, his Honour concluded that:
- Madden's statements, when read in context, would not have been understood by readers as mere expressions of Madden's opinion, given that her language conveyed that copying had, as a matter of fact, occurred; and
- even if Madden's statements could be understood as opinions, she had been reckless in forming them. In particular, his Honour noted that as Madden's allegations were against a competitor and had the potential to harm Seafolly's reputation, Madden should have adopted a cautious approach. Instead, Madden posted her comments within hours of seeing the photos and failed to take steps to determine if the swimwear designs were in fact copies (such as making enquiries as to when Seafolly's swimwear was placed on the market).
Madden also denied that her conduct was in 'trade or commerce', presumably on the basis that she was merely commentating on industry matters. However, Tracey J rejected this argument finding that Madden's statements were in 'trade or commerce', as the principal of White Sands, she had sought to influence the attitudes of customers and potential customers of Seafolly, a trade competitor.
Accordingly, Tracey J found Madden liable for misleading and deceptive conduct.
Orders
Tracey J ordered that Madden:
- pay Seafolly limited damages of $25,000 (for reputational damage only, as Seafolly had failed to establish any economic loss);
- be restrained from reproducing or authorising the reproduction of the Seafolly photos without Seafolly's consent;
- be restrained from making, or aiding, abetting, counselling or procuring the making of, similar statements, representations or claims to third parties; and
- pay Seafolly's costs.
In coming to the decision only to award limited damages, Tracey J noted that the Facebook postings were only accessible to a relatively small number of 'friends' for less than two days. This was in contrast to the email to the publications, which had the potential for wide distribution. However, this email did not in fact lead to any significant publicity in the mainstream press.
Conclusion
This case provides a cautionary tale for those tempted in the heat of the moment to publically allege that their intellectual property rights have been infringed. While fabric and clothing designs may appear similar, that can arise for reasons other than 'copying'. The matter needs to be investigated, and if necessary, legal advice sought, before public statements of infringement are made.
