FEDERAL COURT OF AUSTRALIA Pioneer Electronics Australia Pty Ltd v Woodlands Resources (Aust) Pty Ltd [2000] FCA 1158 INTELLECTUAL PROPERTY – interlocutory injunction – DVD players – trade mark infringement – application by trade mark proprietor and its Australian subsidiary – Australian subsidiary distributor of goods manufactured by Malaysian subsidiary of trade marks proprietor – respondents retailers of genuine goods manufactured by Chinese subsidiary of trade mark proprietor – safety of players – whether double-insulated – evidence obtainable by applicant from Chinese subsidiary but none proffered – inference to be drawn – alleged representation as to warranty Trade Marks Act 1995 (Cth) s 123(1) Trade Practices Act 1976 (Cth) s 52, 53(a),(aa), (c), (d), (ea), (g) and 55 Colgate-Palmolive Ltd v Markwell Finance Ltd [1989] RPC 497 mentioned Jones v Dunkel (1959) 101 CLR 298 applied PIONEER ELECTRONICS AUSTRALIA PTY LTD v WOODLANDS RESOURCES (AUST) PTY LTD V 364 OF 2000 HEEREY J 26 JULY 2000 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 364 OF 2000 BETWEEN: PIONEER ELECTRONICS AUSTRALIA PTY LTD (ACN 005 017 087) and KABUSHIKI KAISHA APPLICANTS AND: WOODLANDS RESOURCES (AUST) PTY LTD (ACN 084 016 053) trading as ONE STOP DVD SHOP, LEW KING NG, JONG KAN FOO, TAO HE, JIAN LI, MIN TAO LI, ZHUO MING LI, VI HUE LIEU trading as V TRONICS COMPUTERS RESPONDENTS JUDGE: HEEREY J DATE OF ORDER: 26 JULY 2000 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1) The application for an interlocutory injunction is dismissed. 2) The application for an order for substituted service is dismissed. 3) The applicants pay the respondents' costs of the application for an interlocutory injunction. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 364 OF 2000 BETWEEN: PIONEER ELECTRONICS AUSTRALIA PTY LTD (ACN 005 017 087) and KABUSHIKI KAISHA APPLICANTS AND: WOODLANDS RESOURCES (AUST) PTY LTD (ACN 084 016 053) trading as ONE STOP DVD SHOP, LEW KING NG, JONG KAN FOO, TAO HE, JIAN LI, MIN TAO LI, ZHUO MING LI, VI HUE LIEU trading as V TRONICS COMPUTERS RESPONDENTS JUDGE: HEEREY J DATE: 26 JULY 2000 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The first applicant Pioneer Electronics Australia Pty Ltd ("Pioneer Australia") is a wholly owned subsidiary of the second applicant Pioneer Kabushiki Kaisha ("Pioneer Japan"). Pioneer Japan is the registered proprietor of the Australian trade mark "Pioneer". Pioneer Australia imports into the country DVD players manufactured in Malaysia by another wholly owned subsidiary. 2 The first respondent Woodlands Resources Pty Ltd ("Woodlands") has been importing DVD players manufactured in China by yet another Pioneer Japan subsidiary and selling them at its One Stop DVD Shop in the Village City Centre at 206 Bourke Street Melbourne. The other respondents are persons associated with Woodlands. Only the first and fourth respondents have been served. An order for substituted service is sought against the second, third and fifth to eighth respondents. 3 By an application filed on 29 May 2000 the applicants claimed that the respondents have breached s 120 of the Trade Marks Act 1995 (Cth), s 52, 53(a),(aa), (c), (d), (ea), (g) and 55 of the Trade Practices Act 1976 (Cth) and have passed off their business as that of Pioneer Australia. 4 On 29 May 2000 Kenny J granted ex parte injunctions having the effect of restraining the respondents from selling Pioneer DVD players not distributed by Pioneer Australia. The applicants now seek a continuation of those injunctions until trial. 5 At the outset I should mention there are two factors which need to be constantly kept in mind. First, the respondents have been selling genuine Pioneer products in the sense that the players in question were manufactured by a wholly owned subsidiary of Pioneer Japan in China. It is clear on the authority of Colgate-Palmolive Ltd v Markwell Finance Ltd [1989] RPC 497 that a trader can sell goods of a different quality in different markets and it would thus be open to a manufacturer who sold higher quality goods on the Australian market to complain of its lesser quality goods manufactured elsewhere being sold in this market. However, this does not seem to be in fact the case here. In the two months since the ex parte injunction was granted the applicants have not adduced any evidence to suggest that Pioneer players manufactured in China are in any relevant respects inferior to Pioneer players manufactured in Malaysia or that consumers would in any practical sense be misled or deceived by buying a Chinese Pioneer DVD player believing it to be a Malaysian Pioneer DVD player – or indeed that consumers were likely to turn their mind to such matters. 6 Secondly, subject to the question of safety, to which I will advert in a moment, there has not been a case made out that if the applicants succeed at trial damages would not be an adequate remedy. 7 Turning to the particular claims which support the injunction sought, the trade mark claim is, I think, for the time being at least, answered by s 123(1) of the Trade Marks Act, which provides: "123 (1) In spite of section 120, a person who uses a registered trade mark in relation to goods that are similar to goods in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied to, or in relation to, the goods by, or with the consent of, the registered owner of the trade mark." 8 If the mark had been applied to these goods by the Chinese subsidiary without the consent of Pioneer Japan, inherently an unlikely situation, one would have expected evidence of that fact. None has been forthcoming. 9 As to the Trade Practices Act issues, a statement of claim has not yet been filed, but a number of alleged misrepresentations were said to arise from the applicants' affidavit evidence. The most important of these was that the players equipment being sold by the respondents were fit for sale, whereas in truth they were unfit to such an extent that the sale was unlawful, and that the equipment had been seized by the relevant electronics authorities. I agree with the submission of counsel for the respondents that a clear distinction has to be drawn between, on the one hand, noncompliance with the relevant statutes and regulations which deal with marking, certification and the like and, on the other hand, safety issues. 10 The most prominent of the latter is the question of double insulation. The respondent's deponent, Mr Ian Absolom, who is well qualified to express an opinion, examined DVD players of the type sold by the respondents. One can accept, in the absence of submissions or evidence to the contrary, that these are no different from those obtained by the applicants' trap purchase. They appear to Mr Absolom to be double insulated, although he says further and more thorough testing would be required to be carried out in order to conclusively determine this fact. That testing would be expected to take several months to complete. Later he says: "Based on the elements tested by me during my examination and testing of the players, each player appeared to be effectively double insulated from the live conductors." 11 His affidavit was sworn on 5 July, that is, some three weeks ago. I accept the contention of counsel for the respondents that the means of establishing whether or not Chinese-manufactured players are double insulated is within the knowledge of Pioneer Japan, being the parent company of the manufacturer. I think this is an appropriate case for drawing an inference in accordance with the rule in Jones v Dunkel (1959) 101 CLR 298. 12 The other matter affecting safety was the question of the plug. It is admitted that this did not comply. It is a minor and separate item costing a few dollars and counsel for the respondents have undertaken on behalf of his clients that no further players will be sold without the proper plug. 13 The question of zoning arises in that the respondents' players were labelled for zone 6, which is China, rather than zone 4, which includes Australia. As far as the evidence shows, although Pioneer Japan has divided the world into zones with a view to confining discs and players within respective zones, there is no reason for concluding that the respondents' players could not play DVDs available in Australia. At the moment there does not seem to be any basis for a conclusion that consumers are misled or deceived. 14 Then there is the question of the C Tick. This relates to interference with radio equipment. I am not satisfied that this is other than a matter of labelling. There is evidence from Mr Song that steps are being taken to obtain the necessary registration. Anyway, this does not appear to be a safety issue. Nor is it likely to be a matter in respect of which consumers would rely. 15 Finally there is the question of warranty. There is some conflict as to what was said when the trap purchase was made. However it is clear that a Woodlands' employee did say there was a warranty on the player sold. No case is made out that, in fact, the warranty would not be honoured. The only point seems to be that the warranty that in fact would be given by the respondents involved taking the machine back to their store and, if it cannot be fixed there, sending it to China for repairs. It is not clear on the evidence at the moment that the respondents represented that a warranty would be honoured only by repair work in Australia or that all repair work in Australia would be done under warranty. In any event, I do not think this issue, of itself, is sufficient to support the drastic step of an injunction. 16 So I therefore dismiss the application for an interlocutory injunction. I think that order, of itself, discharges the order of Kenny J, but I will hear argument as to the precise terms of the order. 17 As to substituted service, there does not appear to be evidence that the respondents sought to be served were resident in Australia or that there is a prima facie case against them for the purposes of O 8 r 2. So I decline to make the order. Also, I should add that there is the evidence of the solicitor, that he has no contact with them. Thus the proposed order directing service would not be likely to result in the matter coming to the attention of these respondents. I dismiss the application for an order for substituted service. 18 There will be an order that the applicants pay the respondents' costs of the application for an interlocutory injunction. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate: Dated: Counsel for the Applicant: C D Golvan Solicitor for the Applicant: Middletons Moore & Bevins Counsel for the Respondent: A Panna Solicitor for the Respondent: Kliger Partners Date of Hearing: 26 July 2000 Date of Judgment: 26 July 2000