FEDERAL COURT OF AUSTRALIA Lone Star Steakhouse & Saloon Inc v Zurcas [2000] FCA 29 LONE STAR STEAKHOUSE & SALOON, INC & ORS v MARY ANNE ZURCAS & ANOR N 1486 of 1999 LINDGREN J 21 JANUARY 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1486 OF 1999 BETWEEN: LONE STAR STEAKHOUSE & SALOON, INC First Applicant LONE STAR STEAKHOUSE & SALOON OF LAS VEGAS, INC Second Applicant RIVER HERO PTY LIMITED (ACN 005 835 099) Third Applicant LONE STAR STEAKHOUSE & SALOON (VIC) PTY LIMITED (ACN 071 008 609) Fourth Applicant AND: MARY ANNE ZURCAS First Respondent ZZZ WINE BAR PTY LIMITED (ACN 089 570 007) Second Respondent JUDGE: LINDGREN J DATE OF ORDER: 21 JANUARY 2000 WHERE MADE: SYDNEY THE COURT: 1. Orders that on condition that the respondents do all things reasonably within their power to facilitate a final hearing at the end of February or early March and on their undertaking to the Court not to promote or advertise their business under the name "Lonestar Saloon", whether through the media, leaflets, posters or otherwise pending the final hearing and determination of this proceeding, the application for interlocutory relief is refused. 2. Directs the respondents to confirm their acceptance of the condition and the giving of the undertaking in order 1 above to the Associate to Lindgren J by 5 pm on Monday 24 January 2000. 3. Notwithstanding order 4 below: (a) Fixes the proceeding for final hearing with an estimated hearing time of 3 days on a date to be advised at about the end of February or early March. (b) Directs the applicants to file and serve their affidavits by 4 February 2000. (c) Directs the respondents to file and serve their affidavits by 18 February 2000. (d) Directs the applicants to file and serve any affidavits in reply by 25 February 2000. 4. Orders, pursuant to s 53A of the Federal Court of Australia Act 1976 (Cth) that the proceeding be, and the same hereby is, referred to mediation by a Registrar on Tuesday 1 February 2000 at 9.30 am. 5. Orders that the costs of the application for interlocutory relief be reserved. 6. Grants each party liberty to apply on 24 hours' notice. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1486 OF 1999 BETWEEN: LONE STAR STEAKHOUSE & SALOON, INC First Applicant LONE STAR STEAKHOUSE & SALOON OF LAS VEGAS, INC Second Applicant RIVER HERO PTY LIMITED (ACN 005 835 099) Third Applicant LONE STAR STEAKHOUSE & SALOON (VIC) PTY LIMITED (ACN 071 008 609) Fourth Applicant AND: MARY ANNE ZURCAS First Respondent ZZZ WINE BAR PTY LIMITED (ACN 089 570 007) Second Respondent JUDGE: LINDGREN J DATE: 21 JANUARY 2000 PLACE: SYDNEY REASONS FOR JUDGMENT (ex tempore) 1 The first applicant is the registered proprietor of, relevantly, two trade marks. The first is trade mark number 574673, a copy of which is annexed to these reasons for judgment and marked "A". That registration is in respect of Class 42 (restaurant services). The other trade mark is number 710032 a copy of which is also annexed and marked "B". It is in respect of Class 42 (restaurant services; provision of food and drink). As can be seen, the two words "Lone" and "Star" feature in each, as does the device of a sheriff's badge or star. 2 The first applicant licenses an unincorporated joint venture comprising the second and third applicants to use the trade marks. 3 The applicants sue the respondents for infringement of trade mark, contravention of ss 52 and 53(c) of the Trade Practices Act 1974 (Cth) ("the TP Act") and the comparable ss 9(1) and 12(e) of the Fair Trading Act 1999 (Vic) ("the FT Act") and passing off. As well, the applicants allege accessory liability of each respondent for the other's wrongful acts. There has been no pleading to date. At present the applicants seek urgent interlocutory relief. 4 The first respondent is the sole director of the second respondent. For convenience I will speak of "the respondents" and "the applicants" without distinguishing between the individual applicants or the individual respondents. 5 The respondents obtained registration on 20 October 1999 in Victoria of the business name "Lonestar Saloon". On 22 December they commenced to trade in premises at 269 Wyndham Street, Shepparton, Victoria, under that name. The business was and is that of an American western style bar or saloon. The applicants operate American western style establishments comprising restaurants and bars. 6 Ms Zurcas gave evidence that when she applied for and obtained registration of the business name "Lonestar Saloon" she had not heard of the applicants' business or name and that in fact she was attracted to "Lonestar Saloon" after seeing a television documentary in relation to a "Lone Star Museum Café" in Texas. 7 When Ms Zurcas applied for registration of the business name "Lonestar Saloon" she also applied for registration of the name "Shepparton Saloon" as her second choice and "Shep Saloon" as her third choice. She was pleased to have her first choice, likes it and wishes to keep it. 8 Apparently the applicants also once had a registered business name but they allowed the registration to lapse. 9 The applicants operate a chain of steakhouses and saloons in, principally, the eastern part of the United States of America. The joint venture operates forty establishments in Australia, all as "Lone Star Steakhouse & Saloon". There are eleven outlets in New South Wales, seven in Queensland, two in Tasmania, two in South Australia, twelve in Victoria and six in Western Australia. The twelve in Victoria include three regional outlets at Geelong, Frankston and Hoppers Crossing (Werribee). The applicants have no establishment in or near Shepparton, have no present plans to establish one there, and Shepparton is outside the "catchment area" of any of the applicants' existing restaurants. 10 The first of the applicants' Australian outlets was opened in Parramatta, New South Wales, in January 1993. Since then they have opened further ones in a staged "State by State" basis, most recently in South Australia. In Victoria the first restaurants were opened some three years ago. By November 1998 all forty establishments were operating and employed more than 3,000 people. Four managers are employed in each restaurant and approximately 80 to 100 full-time, part-time and casual staff members from the local and surrounding communities are employed in each 230 seat restaurant. 11 An affidavit of Stewart Koziora, the Chief Operating Officer of the applicants' establishments, shows a consistent décor and modus operandi of the restaurants. I need not discuss these aspects in detail. There are quality control systems in place and there has been considerable advertising of the applicants' business. Although the applicants do not operate a business in Shepparton, there has been national television advertising of the restaurants and of course travellers to and from Shepparton may be aware of them. The theme of the applicants' advertising and marketing generally is to portray a "Texan roadhouse/saloon" image. The applicants spent on advertising and marketing $920,000 in 1996, $1,800,000 in 1997 and $2,700,000 in 1998. Advertising of this order has continued since. The applicants believe that the value by now attached to their trade marks will be reduced if even one person is permitted to infringe them. 12 Following an order for abridgment of time for service on 23 December last, the application for interlocutory injunctive relief came on for hearing on 6 January. The respondents do not put in issue that there is a serious question to be tried. I take this to mean that they do not put in issue that there is a serious question to be tried that the applicants might obtain on a final basis the relief that they seek on an interlocutory basis or injunctive relief somewhat like it. 13 This concession makes it strictly unnecessary for me to deal with the issue of liability but I will say something about it by way of background and because the strength or weakness of an applicant's case is a factor which can be relevant to the discretion whether to grant interlocutory relief. 14 The infringement of trade mark case is put on the basis of ss 120(2) and 120(3) of the Trade Marks Act 1995 (Cth). Under s 120(2) there is infringement if a person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the registered trade mark in relation to goods or services "of the same description" as the goods or services in respect of which the registered trade mark is registered. 15 In this case it is put that the sign used by the respondents is "deceptively similar to" the registered trade marks of the applicants in relation to services of the same description as those in respect of which the registration exists. The expression "deceptively similar to" is defined in s 10 of the Act so that a trade mark is taken to be deceptive similar to another trade mark if it "so nearly resembles that other trade mark that it is likely to deceive or cause confusion." Mr Nicholas of counsel for the applicants has put submissions indicating a number of reasons why this is a strong case of deceptive similarity. Although I need not and would not decide such an issue in this interlocutory application, I am inclined to agree with him. The simple fact is that the single word "Lonestar" used by the respondents is strikingly similar to the two words "Lone Star" which forms a key part of the applicants' registered trade marks. The respondents have even used a star in some of their advertising although I think that in one case it was not a five point star like the sheriff's badge of the applicants' trade marks. 16 A defence is provided in s 120(2) to a respondent who establishes that using the sign as the respondents did is in fact "not likely to deceive or cause confusion" after all. The onus of proving this rests on the respondents. But as Mr Nicholas points out, there is evidence in this case of some confusion already. My impression at this stage is that the respondents will find it difficult to prove that their use of the name "Lonestar Saloon" is not likely to cause confusion. 17 In sum, as a matter of first impression, it seems to me that on the present evidence the applicants' case under s 120(2) is a strong one. 18 In the alternative the applicants rely on s 120(3). This covers the case where the goods or services are not of the same description as those in respect of which the registered mark is registered, but the registered mark is so well known in Australia that there is still likely to be perceived a connection between the unrelated goods or services and the owner of the registered mark. Although I am inclined to think that the applicants' case on the existing evidence may not be quite so strong under this subsection if the applicants had to resort to it, it is certainly an arguable case. The applicants have some forty establishments established throughout Australia. Just how well known their registered trade marks are may not be fully established by the existing evidence. 19 I do not think it necessary to refer to the causes of action under the TP Act or for passing off. I do, however, think that there is a serious issue to be tried as to the liability of the respondents on those causes of action also. 20 There is discussion in the parties' submissions about the cause of action based on ss 9(1) and 12(e) of the FT Act and as to whether this Court has jurisdiction under ss 158 and 159 of that Act. Contrary to the applicants' submission, I would have thought that the reference to "court" in ss 158 and 159 is, as a matter of construction, a reference to a Victorian court and not this Court, and that the only issue which might be contentious is whether this Court's accrued jurisdiction is attracted. As Mr Nicholas says in his submissions, however, the point is not of any significance for present purposes. 21 I turn now to the balance of convenience. What I must do here is take into account a multitude of factors. The effect of an injunction would be to require the respondents to remove the large "Lonestar Saloon" signs which are on the external walls of the premises where their business is carried on. In so far as this would require a positive act to be done, the injunction would be a mandatory one. If an interlocutory injunction were granted and the respondents were to succeed on the final hearing, they would then have to restore or be at liberty to restore the signs on the building. This would involve an unfortunate waste of money, and militates against the grant of interlocutory relief. 22 I note in passing that the respondents indicated that they would not, for the time being, take positive steps by way of advertising or promoting, whether by the newspaper or leaflets or in any other form, their business under the name "Lonestar Saloon". It will be a term of my not granting an interlocutory injunction that such an undertaking continue as an undertaking to the Court down to the final hearing to which I refer below. 23 I accept that the respondents would suffer some embarrassment by the granting of an interlocutory injunction today but I do not accept at all that the respondents' problems would be anywhere near as serious as Ms Zurcas would have the Court believe. The applicants do not seek to restrain the respondents from carrying on their business: they seek only to restrain them from using the name "Lonestar Saloon" or a similar name in infringement of the registered trade marks. The respondents' evidence did not descend into detail as to what costs would be involved and so far as I am aware all that would be involved would be a change of the name on the outside of the building and perhaps internally, perhaps only by some repainting. Of course this would embarrass the respondents within Shepparton but with the passing of time the embarrassment would disappear. On the other hand, with the passing of time any damage to the integrity of the applicants' trade mark rights increases. It seems to me, however, that for the applicants also the notion of loss over the fairly short period down to a final hearing of this case would be small. There would be difficulty for both parties in quantifying the amount of any loss of profits. 24 The respondents seem to accept that they are not financially well off and say that Ms Zurcas depends upon this business as her only source of income. The respondents put this in favour of their case against the granting of the injunction: an injunction would have a heavy financial impact on them. But as Dr Cashman, the solicitor for the respondents acknowledges, this consideration "cuts both ways": it also demonstrates that the respondents would probably not be good for any damages which might be ordered against them on the final hearing and, accordingly, that damages is an empty remedy in this case. 25 A factor against the applicants is that they did allow their former business name to lapse as a result of which Ms Zurcas was able to register the name, "Lonestar Saloon". Whether as a result of erroneous legal advice or for some other reason, she seems to have thought that this gave her a right to carry on business under that name. Registration of a business name under the Business Names legislation does not do that at all: it merely prevents contravention of the legislation, which provides generally to the effect that a person may not carry on a business under a name other than the person's own name unless the business name is registered under the Act. 26 By duly registering the business name "Lonestar Saloon", Ms Zurcas avoided contravening s 5 the Business Names Act 1962 (Vic) but this did not give her a "right" to carry on business under that name, let alone a right to do so in infringement of the trade marks of others. However, by allowing their own business name to lapse the applicants might be said to have contributed to the respondents' problem. 27 There is another aspect of the applicants' lack of a registered business name which has troubled me and which I have raised with counsel for the applicants this morning. It is the possibility that the applicants themselves, by carrying on business under a name other than their own corporate names, that is, the business name "Lone Star Steakhouse & Saloon", may be in contravention of s 5 of the Business Names Act 1962 (Vic). 28 Of course, I do not express a view on this. Mr Nicholas suggests that it may be that there is no contravention because perhaps the applicants carry on business in Victoria under their own corporate names. But if this is correct, it may have implications for questions of the applicants' reputation in Victoria attaching to their trade marks as such and the likelihood of confusion arising from the respondents' use of the business name "Lonestar Saloon". At least, it raises an aspect of the case that has not been addressed to date. 29 Suffice it to say that this aspect of the matter should be clarified. I will not speculate as to what the course of events would be if an injunction on an interlocutory basis were or were not to be granted this morning and after the hearing the applicants then applied to register "Lone Star Steakhouse and Saloon" as a business name. 30 A factor against the applicants is the remoteness of their present locations from Shepparton and the fact that they have no presence or plans for a presence in Shepparton. A factor in favour of the applicants is that they warned Ms Zurcas on 16 December that if she proceeded to begin business on 22 December under the name "Lonestar Saloon" they would seek an injunction. No doubt some of her costs had been incurred by 16 December but the fact remains that notwithstanding the warning she persisted and appears not to have addressed realistically the fact that the applicants have registered trade marks. 31 The last time the matter was before the Court, Dr Cashman said that his clients had made an offer, which he repeated in Court, to abandon the use of the name "Lonestar Saloon" provided the applicants paid the respondents' "costs and expenses incurred in connection with the signage, promotion and printing". At the time, I wondered if a figure had been put on the costs. This morning Mr Nicholas has said that a totally unrealistically high figure had been insisted upon. There is before me no evidence at all of the amounts of the costs: I have only Ms Zurcas's sweeping generalisations which have been of no use at all. On a final hearing she would not be permitted to give evidence in that form at all. I would have expected the costs to be only the actual amounts to be paid for some repainting. No doubt on the final hearing the respondents will adduce documentary evidence, in the form of quotations or otherwise, of what the work will cost. 32 A factor which strongly influences me this morning is that I am able to offer the parties an early final hearing date at the end of February or early March of which the parties will be advised next week. The parties estimate a hearing time of two to three days. 33 Because this element is so strong in my consideration I have raised with Mr Weate, the solicitor who appears this morning for the respondents, the possible problem presented by the respondents' intimation that they intended to apply for a transfer of the proceeding to the Victorian Registry. I say nothing as to the merits of that application, which has not yet been made in any event - it has merely been foreshadowed. But I have made it entirely clear that the basis on which I would decline to give the injunction today is that the proceeding go to an early final hearing as indicated. If the respondents make an application for transfer, as they are perfectly entitled to do, they should understand that a consequence may be that the interlocutory injunction will be granted. This is not a threat: it is simply a matter of fact that the early final hearing has been an important consideration in my decision not to grant the interlocutory injunction today. 34 In the result the Court: 1. Orders that on condition that the respondents do all things reasonably within their power to facilitate a final hearing at the end of February or early March and on their undertaking to the Court not to promote or advertise their business under the name "Lonestar Saloon", whether through the media, leaflets, posters or otherwise pending the final hearing and determination of this proceeding, the application for interlocutory relief is refused. 2. Directs the respondents to confirm their acceptance of the condition and the giving of the undertaking in order 1 above to the Associate to Lindgren J by 5 pm on Monday 24 January 2000. 3. Notwithstanding order 4 below: (a) Fixes the proceeding for final hearing with an estimated hearing time of 3 days on a date to be advised at about the end of February or early March. (b) Directs the applicants to file and serve their affidavits by 4 February 2000. (c) Directs the respondents to file and serve their affidavits by 18 February 2000. (d) Directs the applicants to file and serve any affidavits in reply by 25 February 2000. 4. Orders, pursuant to s 53A of the Federal Court of Australia Act 1976 (Cth) that the proceeding be, and the same hereby is, referred to mediation by a Registrar on Tuesday 1 February 2000 at 9.30 am. 5. Orders that the costs of the application for interlocutory relief be reserved. 6. Grants each party liberty to apply on 24 hours' notice. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 25 January 2000 Counsel for the Applicants: Mr J V Nicholas Solicitor for the Applicants: Blake Dawson Waldron Solicitor for the Respondents: Dr P Cashman of Maurice Blackburn Cashman Date of Hearing: 6, 7, 14 January 2000 Date last submission received: 20 January 2000 Date of Judgment: 21 January 2000