IN THE FEDERAL COURT OF AUSTRALIA) ) NEW SOUTH WALES DISTRICT REGISTRY) No. G953 of 1988 ) GENERAL DIVISION ) BETWEEN: FIDO DIDO INC. First Applicant UNITED FEATURE SYNDICATE Second Applicant AND: VENTURE STORES (RETAILERS) PTY. LIMITED First Respondent GAZAL CORPORATION LIMITED Second Respondent CORAM: M. L. FOSTER, J. DATE: TUESDAY, 7 JUNE, 1988. PLACE: SYDNEY. REASONS FOR JUDGMENT ( EXTEMPORE } HIS HONOUR: The first applicant in these proceedings is a corporation incorporated in accordance with the laws of the State of New York in the United States of America. It carries on the business of creating cartoon characters and designs and licensing other persons and corporations to use those characters and designs for the purpose of aiding sales of their products. In 2. other words, it creates and licences characters for use in the now well known business of character merchandising. In particular, it has created the character known as "Fido Dido" and other characters in what has been described as the "Fido Dido Range". The second applicant is the world wide licensing representative of the first applicant and has power to appoint licensing agents and licensees to reproduce the characters and designs referred to. Pursuant to such powers the second applicant has appointed a licensing agent in Australia, the local company, Gaffney International Licensing Pty. Limited, (G.1I.L.) which has, in turn, licensed certain clothing manufacturing organisations in Australia to produce garments bearing the Fido Dido range of characters upon then. Royalties are paid to the first applicant under licensing agreements which are entered into by these licensed manufacturers. Under these agreements significant quality controls are imposed upon the manufacturers in relation to garments produced bearing the Fido Dido range of characters. These licensing arrangements are quite clearly typical of licensing arrangements regularly entered into in the world-wide business activity of character merchandising. Examples from the clothing industry referred to in the evidence are the licensing of garments bearing the La Coste and Pierre Cardin insignia. It is clear that the Fido Dido range of characters have proved very 3. successful in America and elsewhere, not only as aids to the sale of clothing but also a whole range of other merchandise such as crockery and stationery. In Australia, G.I.L. launched the Fido Dido characters in September, 1987 by arranging the manufacture of a range of garments through a number of manufacturers to be sold to the Myer/Grace Bros Department Stores for sale in their specialty clothing departments and also to selected clothing boutiques. The evidence of Mr. Gaffney, the proprietor of that company, indicates that he had a definite promotional program for the Fido Dido range which involved, firstly, the introduction of the clothing bearing the characters into the more exclusive shops and, secondly, after it had achieved an anticipated level of success in that merchandising area, to introduce it into the mass merchandiging outlets of the large discount stores. This second step was undertaken in early 1988. A manufacturer referred to in the evidence as "Focus" was engaged to produce garments for this mass merchandising. The Target chain of stores, which through its senior executives, knew of and coveted the Fido Dido characters, bought the whole of the production of Focus for the winter range of garments, thus ensuring that it had the garments exclusively for its shops. Shortly before it commenced sales promotion of the garments through advertising brochures and the like, it found, to its apparent consternation, that the first respondent, Venture Stores 4. (Retailers) Pty. Limited, was advertising in its brochures a tange of garments which Target regarded as deceptively similar and @ clear competitive threat to its newly acquired Fido Dido range. These garments will be referred by me as the "Who Me" "You Too" range. The applicants' share the views of the Target executives; hence the bringing of these proceedings. The first respondent is also a large discount retail chain organisation. The second respondent is a large garment manufacturer which manufacturers the Who Me, You Too range for the first respondent. Recently the applicants obtained temporary and interlocutory injunctive relief against (inter alia) the sale and display of these garments by the first and second respondents. In these proceedings the applicants seek a continuation of that relief until the hearing. The respondents oppose interlocutory relief, seek a dissolution of the existing injunctions and offer an undertaking to keep accounts of profit in respect of the sales of the Who Me, You Too range until the final hearing of these proceedings. They also bring a cross-claim in respect of which they seek interlocutory injunctions: I shall refer to this cross-claim later. By the Statement of Claim the applicants seek relief on the basis that the manufacture and sale of the garments by the second respondent and the advertising and retail selling of them 5. by the first respondent amount to the commission of the tort of passing off against them and also that, by so doing, the respondents are in breach of sections 52, 53({c) and (d) of the Trade Practices Act, 1974 (Cth). iN In the Statement of Claim the applicants refer to the Fido Dido range of characters as "licensed characters". They make the following specific claims in the Statement of Clain. These are set out in paragraphs 11, 12, 13, 14, 15, 16 and 19:- "11. The secondnamed respondent has manufactured and offered for sale and sold to the firstnamed respondent and will unless restrained from this Honourable Court, continue to manufacture and offer for sale in trade or commerce throughout Australia, articles of clothing featuring the licensed characters or characters which are substantially identical with or deceptively similar to the licensed characters. 12. The firstnamed respondent has advertised and offered for sale and sold articles of clothing in trade and commerce throughout Australia reproducing the licensed characters or characters which are substantially identical with or deceptively similar to the licensed characters. 13. The first and secondnamed respondents in respect of the conduct described in paragraphs 11 and 12 hereof have not now and never have had the sponsorship or approval of the applicants nor do the first and secondnamed respondents now have or ever have had an affiliation with the applicants. 14. By their conduct above complained of, the first and secondnamed respondents have engaged and are continuing to engage in trade and commerce in Australia in conduct that is misleading and deceptive and in conduct that is likely to mislead and deceive and the first and secondnamed respondents have thereby contravened and continue to contravene and will unless restrained by this Honourable Court, further contravene section 52 of the Trade Practices Act. 6. 15. By their conduct above complained of, the first and secondnamed respondents have, in trade and commerce and in connection with the supply of goods and the promotion by any means of the supply of goods, falsely represented that the articles of clothing manufactured, offered for sale and sold by them have either or both sponsorship and approval that they do not have and the first and secondnamed respondents have thereby contravened and will continue to contravene and unless restrained by this Honourable Court will further contravene, section 53(c) of the Trade Practices Act, 1974 (as amended) (Commonwealth). 16. By their conduct above referred to, the first and secondmamed respondents have in trade and commerce and in connection with the supply of goods and in connection with the promotion by any means of the supply of goods falsely represented that the first and secondnamed respondents have a sponsorship, approval or affiliation they do not have and the first and secondnamed respondents have thereby contravened and continue to contravene and will, unless restrained by this Honourable Court, further contravene, Section 53(d) of the Trade Practices Act. 19. The conduct of the first and secondnamed respondents referred to in paragraphs 11 an 12 above, is and was at all material times, calculated to pass off the goods/or the businesses of the first and secondnamed respondents as being, or as being associated with, the business of the firstnamed applicant." The question for my determination, at this stage, is of course, whether the material placed before me raises a serious question to be tried on these issues and if so whether it is a proper case for interlocutory relief. There is no dispute that the Fido Dido characters were created by persons in the advertising industry in New York who incorporated the first applicant for the purpose of promoting and 7. exploiting their creations. The promotion has been extensive in America and, it would seem, the characters have become very well known and well received as aids to the selling of various kinds of merchandise. It appears that they made their debut in garments offered for sale in an exclusive boutique area of Macy's Department Store in New York. Their subsequent promotion has taken place through standardized licensing agreements, extensive advertising, promotional videos, media release kits and the like. There are many examples of the Fido Dido characters in the voluminous array of exhibits that have been placed before me. It is necessary, however, that I venture a brief description of them. The basic Fido Dido character is a distinctive line drawing of an essentially very simple kind. It is the stylistic graphic representation of the head of a young man. The face is triangular and has prominent ears represented only in outline. Eyes, nose and mouth are represented by minimal marks. The hair is shown as wavy and spiky but is represented only by a few bold lines of that shape. No neck is drawn in and the picture ends at a sort of representational shoulder line under which the name Pido Dido is printed in a bold somewhat unformed hand. It is, in my view, fair to describe it as more than mere art work. To some extent it partakes of the nature of a work of art. It conveys a definite impression of a youthful 8. character to which the viewer can readily respond. The name Fido Dido is clearly the given name of the character evoked by the drawing and seems quite appropriate to it. Although Fido Dido is not a comic strip or cartoon character it is not difficult to imagine him as being one. He has a range of variations in which he wears various stylised hats such as a reverse baseball cap (Fido Boy), a Statute of Liberty corona (Liberty Fido) and, in a group of three, American seamens hats (Fido Boys). Despite these variations in head gear the esential Fido character is retained. The character is also given a philosophy of life by his creators. This philosophy is described as the Fido Credo. It is to be found, in accordance with licensing requirements, on a patch sewn on to the garment or on a label or swing tag. It is quite clearly a part of the total Fido Dido concept. It contains a number of imperishable lines such as "Fido is youth. Fido has no age. Fido sees everything. Fido judges nothing" etc. It is quite possible to envisage that merchandise bearing these designs should become objects of eager acquisition by the young and why Mrs. Bates, a senior executive of the Target organisation, who gave evidence in these proceedings, should have regarded them as "a hot property". The questions of whether there has been prima facie a passing off or breaches of the sections of the Trade Practices 9. Act, involve in this case the same factual considerations, as appears from the pleadings set out above. Before coming to what I regard as the essential question of this case, it is necessary to deal with certain preliminary matters. In doing so it is convenient to have regard firstly to the claim for passing off. This claim is put on the basis of the allegations in paragraphs 11, 12 an 19 of the Statement of Claim, set out above, namely, that the second respondent by manufacturing and selling clothing featuring the licensed characters or characters which are substantially identical with or deceptively similar thereto, and the first respondent by advertising, offering for sale and selling the clothing, engaged in conduct which was calculated to pass off the goods and/or the business' of the first and second respondents as being or as being associated with the business' of the first named applicant. As developed in argument, on the evidence, the claim for passing off really amounted to an assertion that the respondents were not reproducing in their garments the licensed Fido Dido characters as such, but characters so basically similar as to lead the public to believe that the garments were part of the Fido Dido merchandising range and, therefore, came from the same business source, or were produced under licence given by the proprietors of the Fido Dido characters. 10. In answer to this claim the respondents made a number of submissions, which I do not accept and which I shall now refer to briefly. Firstly, it was put that the evidence did not indicate that the Fido Dido characters had any reputation or goodwill in Australia sufficient to be protected by the action for passing off. I do not agree. Although their reputation was established mainly overseas, it is clear that, as at the time when the conduct complained of occurred, a quite sufficient reputation had been built up in Australia as a result of the range having been "launched" in the Myers Department Stores in late 1987, in association with a very significant advertising campaign, especially in Myer brochures. There had been a significant volume of sales and the characters had considerable public exposure by their being observed on garments being worn by purchasers from Myers and the speciality boutiques which were merchandising them. When the respondents started to advertise and sell the Who Me, You Too range, Fido Dido had already acquired a reputation and goodwill capable of being damaged by passing off. (Cadbury Schweppes Pty. Ltd. v. Pub Squash (1981) R.P.C. 429). Secondly, it was put that, even if the Fido Dido characters had acquired some currency at the relevant time, the applicants and their respective businesses were quite unknown to 11. the relevant Australian public so that they had no relevant goodwill to be damaged by any suggestion of connection between these businesses and the business's of the respondents through introduction into the market place of the Who Me, You Too range. As to this, I am satisfied that it is unnecessary for passing off to have occurred; that the public should have known of the precise identity of the applicants. It is sufficient that the facts indicate that there would have been an awareness that the characters would have been created by someone who would have had a business interest in putting them on the market either directly or by some licensing system (Birmingham Vinegar Brewery Co. Ltd. v. Powell, (1897) A.C. 710 - the Yorkshire Relish Case). Thirdly, the somewhat related point was made that the Fido Dido characters had, as it were, no reference point. They had had no prior public exposure as characters in a comic strip like the Garfield or Snoopy characters before them, or in an animated cartoon such as Mickey Mouse and Donald Duck, or as literary or television figures such as The Wombles or The Muppets. This, in my view, is not critical. It does not prevent Fido Dido filling a role in character merchandising. It merely makes the public acceptance of the character on garments or other objects more difficult. The evidence satisfies me that at the time of the impugned conduct the concept of the Fido Dido character was quite sufficiently established in the minds of the relevant section of the buying public through advertising and promotion, so that a member of that section could see a Fido Dido 12. T~shirt, for instance, as an object of sartorial desire and seek to purchase one by asking for it by that name. Fourthly, it was put that there could be no passing off as there was no common field of activity between the respondents, who were manufacturers and merchandisers, and the applicants, who were only engaged in the industry of licensing. It appears now to be accepted that this doctrine is discredited; (see, e.g. Stringfellow & Anor. v. McCain Foods (G.B.) Ltd. & Anor. (1984) R.P.C. 501). In any event, I am happy to adopt, in this regard, the reasoning of Helsham, C.J. in Equity, in Children's Television Workshop Incorporated v. Woolworths New South Wales Ltd. (1981) 1 N.S.W.L.R. 273, "the Muppetts Case", to the effect that both the applicants and the respondents were engaged in the general activity of getting the goods into the market place and selling them and to that extent shared a common activity. Fifthly, it was submitted, I think rather faintly, that the law would not assist, through the medium of an action for passing off, a person who was merely trafficking in licences. This submission was based upon Re American Greetings Corporation, 1 I.P.R. 486, the Holly Hobbie Case, where there was upheld a decision of a Registrar refusing to register a trademark on the grounds that, contrary to the Trade Marks Act, 1955 (Cth.) it would tend to facilitate trafficking in trade marks. I do not think the case is in point: we are not dealing here with the question of registration of a trade mark or trafficking in them; 14. claims under sections 52 and 53 of the Trade Practices Act, namely, whether there is a serious question to be tried that the You Too, Who Me range of characters are, in fact, so deceptively similar to the Fido Dido characters as to mislead persons into believing that they come from a common source or that there is a business connection between the respective producers of the characters. I should say at the outset that the evidence currently establishes to my satisfaction that there was in the production of the You Too, Who Me figures no conscious copying, with careful variations, of the Fido Dido characters. Earlier suspicions that that might have occurred are dispelled by the respondents' evidence that their characters owed their origin to figure characters on American garments apparently totally unrelated to the Fido Dido garments, and that they were created without the Fido Dido garments, and that they were created without the Fido Dido figures exerting any influence at all. This does not, of course, dispose of the question: direct copying does not necessarily result in a misleading assertion of common origin between the copy and the copied (Hutchence & Ors. v. South Seas Bubble Co. Pty. Ltd. & Ors., 64 A.L.R. 330) nor does the absence of any intention to copy produce the situation that no such misconception can be caused. Indeed, it is clear that direct copying of another design is perfectly permissible providing, as is the case here, there is no infringement thereby of rights given as a result of appropriate registration procedures under 15. the Trade Marks, Design and Copyright Legislation; (see discussion by Brennan, J. in Parkdale Custombuilt Furniture Pty. Ltd. v. Puxu Pty. Ltd., 149 C.L.R. 191 at p. 219, et seq;) that is, of course, unless, as a result of copying, passing off or a relevant breach of the Trade Practices Act occurs. A large number of authorities were cited to me on this aspect of the case. For present purposes, I consider that the relevant principles may all be found in the decision of the High Court in Parkdale Custombuilt Furniture Pty. Ltd. v. Puxu Pty. Ltd. (op cit) and that they apply equally, in this case, to the claim in passing off and under the Trade Practices Act. They are that:- (a) It is not enough to establish that the conduct complained of was confusing or caused people to wonder whether two products may have come from the same source; (per Gibbs, C.J. at p. 98); (b) The Court must decide objectively whether the conduct is misleading or deceptive or likely to mislead or deceive and evidence that members of the public have actually been misied is not conclusive; (per Gibbs, C.J. at p. 99); (¢) Consideration must be given to the class of consumers likely to be affected by the conduct and to the effect of that conduct on reasonable members of that class; (per Gibbs, C.J. at p. 99); (d) The conduct of the defendant must be viewed as a whole and not selectively; (per Gibbs, C.J. at p. 99); (e) Generally speaking, the sale by one manufacturer of goods which closely resemble those of another manufacturer is not a breach of s. 52 of the Trade Practices Act if the goods are properly labelled; 16. (£) If a consumer has an erroneously preconceived belief that the former manufacturer has a monopoly, a false assumption by the consumer as to the source of the latter manufacturer's goods is self-induced; (per Brennan, J. at p. 255). Bearing these principles in mind, I approach the question whether the appearance of Who Me, You Too range could have induced a mistaken belief that it had a common origin with the Fido Dido range, that is, a belief to that effect as opposed to a state of doubt or uncertainty. Were it not for certain evidence given in the case I would unhesitatingly answer this question in the negative. I have already described the Fido Dido characters and their impact on the viewer, as I perceive it to be. I mention again the fact that the image is always clearly associated with the name Fido Dido or a clearly recognisable variant of it as being the appellation of the character portrayed. The Who Me, You Too range do not, in my view, portray any character or characters at all; they are stylised black and white figures, as is Fido Dido, but they carry no name and their facial characteristics are not constant. They do not have an apparent personality as do the Fido figures. There are obvious differences in that the faces are more fully drawn and the figures are clothed and to some extent adorned. The spiky hair is similar but this is consistent with current hair fashion in the particular age group rather than being a determinative feature of the Fido Dido character. Indeed, in many Fido variants the hair is not shown as headgear is depicted as being worn. 17. Were this a final hearing on the evidence currently before me, I would find no passing off and no breaches of the relevant sections. However, it is not a final hearing and there has been a clear indication that the applicants will call further evidence at the hearing, particularly relating to the problems facing consumers at the point of sale. There is currently no indication what that evidence will be. Present evidence does not deal with circumstances at the point of sale at all. As things stand, the applicants rely on the evidence of Mrs. Bates and Mr. Gaffney, both of whom have claims to expertise and who expressed the views that the Who Me, You Too characters are most deceptively similar to the Fido Dido characters. The applicants also rely on the affidavit evidence of a large number of consumers who, in various ways, say that the characters are deceptively similar. Some go so far as to say that they think that the You Too, Who Me characters are indeed the latest addition to the Fido Dido range. Although it is not essential that such evidence should relate to impressions obtained at the point of sale (see Per Deane and Fitzgerald, JJ., Taco Co. of Australia Inc. & Anor. v. Taco Bell Pty. Ltd. & Ors., (1982) 42 A.L.R. 177 at p. 205) it is clear that such evidence must carry far greater weight in a case of this kind than evidence of persons who are not actually contemplating purchase at the time when they are considering the relevant garments. 18. The most significant factual question, in my view, is whether a customer wishing to buy a Fido Dido garment would, at the time of purchase, be satisfied that one of the Who Me, You Too range of garments was, in fact a genuine Fido Dido garment. Apart from the appearance of the Fido Dido garments, which I have described at some length, it must be noted that they are also clearly labelled as Fido Dido and, generally speaking, have the Credo sewn on as a patch or appearing on a swing tag. I am very much of the view, at this stage, despite the evidence to which I have made reference, that a reasonable customer when seeking to purchase a Fido Dido garment would not be misled by the appearance of the Who Me, You too garments into purchasing one of them as a Fido Dido product. I should perhaps add that the consumer evidence has all the defects referred to by Wilcox, J. in Chase Manhattan Overseas Corp & Ors. v. Chase Corp. Ltd. & Anor. (1985) 9 F.L.R. 129 at 142. Nevertheless, with some considerable hesitation, I have come to the view that I must find that there is a serious question to be tried. The expert evidence cannot be ignored in these interlocutory proceedings and the consumer evidence undoubtedly provides a basis for the assertion of misleading and deceptive conduct. 19. However, that does not dispose of the question of interlocutory relief. It is quite clear, on the evidence, that if I continue the current injunction there will be considerable immediate financial loss and disruption to the respondents' businesses. The Who Me, You Too and related ranges are ready for sale and have already been sold in large numbers. Although it will be easier for the respondents to quantify losses if the injunction is continued and ultimately refused than it will be for the applicants if it is now dissolved and later granted, it will nevertheless be no easy matter for the respondents. Questions of loss of future orders will come into consideration with attendant not inconsiderable problems of quantification. I must also bear in mind what Barwick, C.J. said in Hornsby Building Information Centre Pty. Ltd. & Anor. v. Sydney Building Information Centre Ltd., (1977) 140 C.L.R. 216 at 221. His Honour there said:- "In any case it is only in the most exceptional cases that the Court should by interlocutory order restrain the carrying on of a business. As a general rule the keeping of accounts in the interim whilst the rights of the parties are determined, is not only preferable but sufficient to protect the interests of the moving party." Also, I must bear in mind that the question of whether an interlocutory injunction should be granted, may be said to have a very practical and substantial effect in this case. It will prevent, if granted, the respondents from selling their winter range in competiton with Target's Fido Dido range of winter garments. The garments not sold will probably, having 20. regard to the vagaries of the fashion world, be practically unsaleable in the future. In determining the question of interlocutory relief, in these circumstances, it is desirable that I take into account my view as to the strength of the applicants' case for final relief in seeing where the balance of convenience currently lies (Kolbach Securities Ltd. v. Epoch Mining N.L., (1987) 8 N.S.W.L.R. 533). IT have already expressed my views on this matter and I stress again that I have no material before me to indicate what further evidence the applicants expect to call at the final hearing and what its strength may be. In these circumstances, I am of the view that the balance of convenience favours the respondents. In so holding, I take into account, of course, the undertakings that have been given as to their keeping of accounts pending the final hearing of these proceedings. Accordingly, I dissolve the injunctions previously granted. The respondents have brought a cross-claim to which I have already made reference. It is in respect of the applicants' placing upon the garments, in association with the Fido Dido character, the subscriptions "Fido Dido Inc. licensed by G.I.L. Agent for U.F.S. Inc." or, alternatively, "1985 Fido Dido Inc. 21. licensed by U.F.S. Inc." These subscriptions are preceded by a "Cc" in a circle. The respondents allege that the application of the subscriptions is a breach of the Australian Copyright laws. I should add that this assertion was also made in the context of a submission that interlocutory relief should have been refused to the applicants on the basis of the doctrine of unclean hands. In the cross-claim they seek an interlocutory injunction restraining the applicants from requiring that these subscriptions be added to garments produced in the Fido Dido range. This matter has not been the subject of full argument before me. Considerable written submissions have been placed before me on the part of the respondents. The applicants have not been able to address in the time available in interlocutory proceedings, these arguments which arose, for practical purposes, during the course of the proceedings. They may make it clear that they will wish to contest stenuously the proposition of law that have been advanced and will also wish to call evidence on the question of whether the subscriptions are capable of amounting to misleading or deceptive conduct such as to warrant the injunctive relief, which is sought by the respondents under the Trade Practices Act. It is quite apparent to me that there are weighty questions of law and fact to be considered in relation to this 22. cross-claim. I am satisfied that a serious question to be tried has been disclosed. The material before me, however, does not satisfy me, in any respect, that the balance of convenience currently favours the granting of interlocutory relief in respect of this cross-claim, and I decline to do so. The question of costs of the proceedings to date will be reserved. At the request of the parties, I indicate that I am clearly of the view that this matter should be given an expedited hearing. I place the matter in Friday's directions list for further directions (10 June, 1988). I certify that this and the 2 preceding pages are a true copy of the reasons for judgment herein of his Honour Mr. Justice M. L. Foster. Dated: (0 Send , \Aeb :