Fallen angel: Australian Full Court pops the bubble on additional damages in trade mark infringement

5th April 2024

On 23 February 2024, five judges of the Federal Court of Australia overturned an award of damages against an e-marketplace provider, indicating that nominal damages and additional damages for trade mark infringement should be reduced from $8,250 to $100 and from $70,000 to zero respectively.[1]  With the rise of e-marketplaces and platforms publishing user-generated content, this case signals the Court’s adoption of a more lenient approach to liability of platform operators for trade mark infringement occurring on their platforms.  The decision provides guidance for platform operators as the importance of moderation practices in minimising exposure for such liability.

Background to proceedings

Redbubble Ltd (Redbubble, now Articore Group), an Australian company, operates an online marketplace that connects artists and designers with consumers by enabling artworks to be printed on demand onto various products (t-shirts, caps, mugs etc.).  Redbubble’s business model, which has been the subject of litigation over the years,[2] operates as follows:

1. Creators create an account with Redbubble and upload their artwork onto Redbubble’s website.  They nominate which products the artwork can be applied to and provide titles, descriptions and ‘tags’ for the artworks.
2. Redbubble causes copies of the artwork to be displayed on its website. 
3. Consumers can search for, select, and pay for a particular artwork to be applied to a product on Redbubble’s platform.
4. Redbubble arranges for the product bearing the artwork to be produced by its supplier and arranges for it to be delivered to the consumer.

Redbubble has a content moderation system in place, including for the detection of artworks that are uploaded to its website that infringe another person’s trade mark.  The Full Court noted that the system is not faultless nor instantaneous.  We discuss this further below.

The Hells Angels is an international confederation of motorcycle clubs, with chapters established around the world including in Australia. The US entity, Hells Angels Motorcycle Corporation (Hells Angel US) owns, licenses and protects Hells Angels’ intellectual property, including five Australian trade marks (AUTM nos. 526530, 723219, 723463, 1257992 and 1257993) for the words “HELLS ANGELS” and/or a skull wearing a winged helmet as pictured below:

(Hells Angels Trade Marks).

The Hells Angels Trade Marks cover various goods and services including printed matter in class 16 and apparel in class 25. Hells Angels Motorcycle Corporation (Australia) Pty Limited (Hells Angels AU) is the exclusive licensee of the Hells Angels Trade Marks.

Hells Angels US and Hells Angels AU (together Hells Angels) commenced proceedings against Redbubble in respect of certain artworks uploaded to the Redbubble website by a creator which included the words “Hells Angels” and/or a skull wearing a winged helmet.

In 2019, the trial judge found that Redbubble did infringe the Hells Angels Trade Marks under s 120(1) of the Trade Marks Act 1995 (Cth) (TM Act) and awarded Hells Angels nominal damages of $8,250 and additional damages of $70,000, as well as declaratory and permanent injunctive relief.[3]

Findings of the Full Court

The Full Court overturned the orders made by the trial judge.  In addition to erring on the calculation of damages and additional damages, the Full Court held that the trial judge had erred in granting the declaratory relief and final injunction for trade mark infringement.

A key issue on appeal was the award and quantification of nominal damages for trade mark infringement.  The Full Court did not accept Redbubble’s submission that the trade mark infringements were de minimis, trifling or technical infringements; instead their Honours held that goods were “available for purchase in relation to the Hells Angels Trade Marks for nearly a year” and “viewed through that lens, it is impossible to describe the infringements as [such]”.  This included consideration of evidence that of the 223 views of the infringing products, at least 94 were done on behalf of Hells Angels, i.e. in the lead up to proceedings.

The Full Court held that the primary judge erred in his calculation of nominal damages, holding that an award of $8,250 (calculated on the basis that each of the 11 examples of infringement justified an award of $750) was not a nominal amount Their Honours held that a wrongful determination of a sum of nominal damages was selected as a starting point, the discretion to award additional damages would miscarry. In the Full Court’s view, an appropriate award of nominal damages was $20 for each of the 5 accepted examples of infringement.

Section 126(2) of the TM Act authorises the Court to ‘include an additional amount in an assessment of damages for an infringement … if the court considers it appropriate to do so …’. The Full Court declined to exercise its discretion to award additional damages, finding that the factors in s 126(2) of the TM Act – flagrancy, action after being informed of the infringement, the needs of specific deterrence, any benefits accrued as a result of infringement and “all other relevant matters” – were largely against such an award.  The Court’s view on specific deterrence – which in our view, is noteworthy to those e-marketplaces operating on similar business models – involved the question of how an award of additional damages might encourage Redbubble to change its content moderation procedures so that infringing designs could not be uploaded to the website in the first place.  In this respect, the Full Court took a pragmatic approach, accepting that specific deterrence was not feasible except with Redbubble’s ability to conduct business.  In drawing this conclusion, the Court considered whether:

• Redbubble could change its content moderation procedures so that its computer systems detect images which are deceptively similar to the trade marks before they are uploaded.  However, the Court held that on the evidence, “the detection of an image that is deceptively similar to another is something which lies beyond Redbubble’s technological reach, although it also suggests that it is working on the problem”.  Their Honours advised caution in this approach, as “deciding that something is deceptively similar to something else is an impressionistic task” and held that the computer systems “do not yet have the capacity to engage in this kind of impressionistic exercise…[but] it may be the case that artificial intelligence will go some way towards making inroads into this problem” in the near future. 
• Redbubble could alter its content moderation procedures in some other way so that, through a combination of automated and human activity, infringing artwork could be detected before being uploaded.  However, the Court found similar limitations as described above on the evidence.
• Redbubble could cease to trade altogether.  However, this was inappropriate and drastic as “Redbubble’s business is a lawful business” and while “its content moderation procedures as they presently exist undoubtedly permit infringements of registered trade marks to occur…it endeavours to prevent this from occurring”.  There was no evidence on any delinquency on its approach to content moderation. 

Takeaways

While the waters remain choppy in terms of platform and e-marketplace liability in Australia which various reviews currently underway (see our articles here on social media reforms, digital platform reforms and the government’s response), such as the Copyright enforcement review 2022-23, this decision provides some comfort for liability on trade mark infringement – provided that appropriate steps are taken.  While it is well-established in Australia that there is no concept of authorisation of infringement recognised under Australian trade mark law,[4] this is not as clear cut for platforms and e-marketplaces that have some involvement in the purchasing scenario or operate on a similar business model to Redbubble’s.  This decision highlights that providers of these services should ensure that:

• their moderation practices reasonably prevent situations where users might upload content that potentially infringes a third party’s marks without the platform’s knowledge – there is no one size fits all approach, however the practices should be justifiable on a reasonable commercial basis;
• moderation is actioned in a consistent way and there are records of moderation practices and policies in place;
• when notified of infringements, swift action is taken and steps to investigate further are taken – including getting legal advice early when it comes to potential trade mark infringement;
• moderation practices should be constantly evolving with technology as this could play a significant role in mitigating any damages award where infringement is found; and
• if deploying artificial intelligence to assist with or make an impressionistic assessment, there are good records of human prompts or input.

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[1] Redbubble Ltd v Hells Angels Motorcycle Corporation (Australia) Pty Limited [2024] FCAFC 15.

[2] Pokémon Company International, Inc. v Redbubble Ltd [2017] FCA 1541.

[3] Hells Angels Motorcycle Corporation (Australia) Pty Limited v Redbubble Ltd (No 5) [2022] FCA 837.

[4] Recently reaffirmed in PDP Capital Pty Ltd v Grasshopper Ventures Pty Ltd [2021] FCAFC 128.