Rare Permanent Injunction Issued for Intellectual Property Dispute
The High Court has delivered a rare verdict in the IP field: the granting of a permanent injunction on the grounds of breach of contract which involved the unauthorised use of a confusingly similar trade mark.
An agreement between Corporate Cabs Limited (CCL) and Kumar, granted Kumar a non-exclusive licence to operate taxi business under CCL’s CORPORATE CABS brand and granted Kumar the right to use CCL’s intellectual property for a three year period form 13 May 2016.
Kumar breached the Operating Rules of the agreement, and the licence was subsequently terminated in November 2017.
In December 2020, CCL became aware of Kumar’s use of BUSINESS CABS in relation to an independent taxi service. Mr Kumar used a vehicle and style of presentation that CCL considered to be “deceptively similar to their registered trade marks and vehicles used by licenced operators."
The interim injunction
Following Kumar’s failure to respond to cease and desist notices, despite making some changes to his taxi livery including changing the name to BUSINESS CAB, CCL requested an interim injunction in August 2021. CCL alleged that Kumar had engaged in misleading and deceptive conduct contrary to section 9 of the Fair Trading Act, passing off his taxi business as being that of CCL and infringing CCL’s registered trade marks.
The evidence showed Kumar’s use of the identical font type as used in CCL’s registered trade marks, in the same colour combination on the same type of car (white Holden Commodore VF Caprice) widely used by licenced operators. Mr Kumar also continued to use on his car the unique cab number designated to him by CCL for his use when operating a taxi under the CCL licence agreement.
Applications for interim injunctions are to be considered and determined in accordance with the approach taken in American Cyanamid Co v Ethicon Ltd. This requires the court to consider whether there is a serious question to be tried and whether the balance of convenience and overall interests of justice favour the Court granting the injunction. The “serious question” is a threshold issue. If satisfied that the question is not vexatious or frivolous then the Court will proceed to consider the other two issues.
In terms of the balance of convenience and overall justice, the question is whether refusing the injunction would be harder on a plaintiff who was eventually successful at trial, than granting the injunction would be on the defendant should they be successful. This assessment is undertaken by reference to the preservation of the status quo, the adequacy of damages as a remedy for the plaintiff, the non-compensable disadvantages to either of the parties, and their cases’ relative strengths.
Davison J found that the plaintiff’s evidence showed that there was a serious question to be tried. CCL had shown that it was the owner of the registered trade mark Corporate Cabs, which was presented in a particular font and the particular placement of signage when used by authorised licencees. The evidence also showed that following the termination of the licence agreement Kumar adopted and used the BUSINESS CABS and BUSINESS CAB brand in manner that closely resembled CCLs trade mark. His Honour found that Kumar’s taxi branding was likely to cause confusion and lead customers to believe that Kumar’s taxi was a CORPORATE CAB or somehow affiliated with CCL:
”I am satisfied by the affidavit evidence it has produced that the plaintiff has demonstrated that it has a seriously arguable case against the defendant for breaching the Agreement and its intellectual property rights arising from its registered trade marks and its established and well-known Corporate Cabs branding, signage, and taxi vehicles”.
Included in the evidence were reports from witnesses who had seen Kumar driving his BUSINESS CABS taxi recklessly. These witnesses initially thought they were CLL cabs, due to the similarities between the two brands. This was seen as clear evidence of deception and confusion.
Davidson J also found that the balance of convenience clearly favoured the granting of an interim injunction. The evidence showed that Kumar had been promoting and using his taxi in such a manner that would prima facie appear to be intended to take advantage of the close resemblance of his BUSINESS CABS brand and CCL’s CORPORATE CABS brand to derive commercial benefit to the detriment of CCL and its licenced taxi operators.
Without an interim injunction restraining Kumar’s ongoing use of the BUSINESS CABS branding, the Court considered it likely that Kumar would continue to exploit the commercial benefit of his taxi’s appearance closely resembling that of an authorised CORPORATE CAB and cause reputational damage to CCL. Davidson, J found that CCL had shown that it had a strong case against Kumar for damages and a permanent injunction restraining him from carrying on his taxi business in the manner and style shown in evidence.
The Court found that CCL proved on evidence that the harm caused to them by the Court not granting the injunction well outweighed the harm caused to Kumar if he were to successfully defend the claim:
“By being restrained from conducting his taxi business as he has been under the “Business Cabs” brand and style does not prevent him from carrying on his taxi business under some other name and style that is clearly and distinctly different from the plaintiff’s during the period until the substantive proceeding is determined”.
On this basis, an interim injunction was granted, restraining Kumar from using any infringing elements in his taxi business conduct, until further order of the Court.
In the usual course of events, an interim injunction effectively ends the matter as the defendant complies with the requirements of the interim injunction and there is no need for the plaintiff to take the matter to a substantive hearing. However, in this case, CCL found that Kumar did not take any steps to comply with the terms of the interim injunction and in February 2022, CCL sought a permanent injunction.
The permanent injunction
Kumar failed to appear in court or take any steps to defend CCL’s application. For this reason, Wylie J was hesitant to issue a permanent judgement based on the lack of engagement from the defendant or evidence proving Kumar was in fact continuing to engage in the restrained conduct. Nevertheless, the Court found that permanent injunctions may be applied where it acts to prevent breach of agreements and in the case of a ‘negative promise’.
CCL’s claim was based on breach of contract and breach of s 41(3)(a) Fair Trading Act, which allows the court to issue a permanent injunction where a defendant’s conduct breaches s 9 of the same Act, irrespective of whether behaviour is repeated. Following Red Eagle Corporation Ltd v Ellis, the test for s 9 is whether a reasonable person in the claimant’s position would likely have been misled or deceived. The claimant must prove the higher threshold of a ‘real risk’ rather than a mere possibility’. Judge Wylie found that there was not a strong claim under the Fair Trading Act, due to the lack of evidence of Kumar’s continued use after the interim injunction was granted.
However, the judge found that CCL could succeed under breach of contract, due to Kumar’s use of the taxi service appearing ‘to be intended to take advantage of the close resemblance of BUSINESS CABS to CORPORATE CABS. In particular, the Court touched on the similarity between the two parties’ brand appearance, top light, and use of a similar model of car.
Wylie J based his ruling on a number of factors to justify the application of a permanent injunction to a contract breach. These included unfairness in making the contract, whether the defendant would suffer disproportionate hardship from the damages, whether the contract is purposed for personal services, whether the remedy would be available for both parties, and whether there is a delay in seeking relief.
Whilst permanent injunctions are rarely needed, Judge Wylie found that Kumar could easily and inexpensively recommence use of the BUSINESS CAB trade mark. Moreover, Kumar’s reckless driving whilst using such similar signage, was likely to damage CCL’s reputation if he continued to use it in such a manner. In all, the court ruled in favour of the plaintiffs, ruling that a permanent injunction was appropriate.