State of Escape Accessories Pty Limited v Schwartz  FCA 1606 (6 November 2020)
Unsuccessful action by State of Escape Accessories (SEA) alleging copyright infringement, misleading and deceptive conduct and passing off arising from the design, importation and sale by Ms Schwartz and her company, Chuchka Pty Ltd of 34 tote bags.
SEA asserted copyright in its perforated neoprene tote bag with sailing rope which wrapped around the bag and formed handles. There were also press studs at each end and an internal detachable pouch. Examples are shown below:
These tote bags were manufactured in Australia by Southern Cross Leathergoods with first sales in December 2013. By March 2016, some 60 – 70 tote bags were being manufactured per day. SEA’s tote bags carried State of Escape branding.
Schwartz, through her company, Chuchka Pty Ltd, arranged for neoprene tote bags to be manufactured by Happy Sport in China through the Alibaba online market place. Schwartz adapted online images of tote bags shown on Happy Sport’s Alibaba website which, it transpired, were actually images of SEA’s tote bags. There was evidence of an online order for a State of Escape tote bag dated 30 October 2015 by Schwartz.
Although Schwartz gave a different account of this order, Davies J was prepared to accept that her account was the result of faulty recollection rather than untruthfulness, However, his Honour found it improbable that Schwartz had not visited the SEA website and was not aware of the features of the SEA tote bag before arranging for the manufacture of her tote bags which she imported in December 2015 for sale in the Australian market under Chuchka branding.
SEA had to establish that its tote bag was a work of artistic craftmanship to be able to rely on copyright. This is because SEA did not obtain any registered design right prior to commercialising its tote bags and s77 of the Copyright Act effectively extinguishes copyright protection for an artistic work, except if it is a work of artistic craftmanship. The legislative policy behind the so – called Design/Copyright overlap is to encourage design registration and to limit or remove copyright protection for artistic works which are applied to industrial products.
Davies J referred to the High Court judgement in Burge v Swarbrick  HCA 17 for relevant principles to decide whether the SEA tote bag was a work of artistic craftmanship and found against SEA on this critical point. SEA’s evidence showed that the design features of the SEA tote bag were constrained by functional considerations which went against the design being approached from the perspective of an artist-craftsperson.
Given this finding, it was unnecessary to consider copyright infringement, but his Honour did comment on this and would have found infringement under ss 36, 37 and s38 if copyright did subsist in SEA’s tote bags. Davies J also would have found that Schwartz and Chuchka could not rely on the defence of innocent infringement under s115(3). However, SEA would not have been entitled to an award of additional damages for flagrant conduct under s115(4).
Consumer law and passing off
Davies J largely rejected SEA’s claims for misleading or deceptive conduct under the Australian Consumer Law and passing off under common law.
The relevant date was December 2016 which was the earlies sale of the offending tote bags. His Honour noted that it is “well established as a matter of law that a trader can acquire a reputation in the features of a product and that the appropriation of a similar shape or features may amount to misleading and deceptive conduct and passing off”. However, his Honour was not satisfied that SEA had established the requisite reputation in the features of its tote bag, as distinct from the reputation in its State of Escape brand. The presence of different branding on the respective tote bags was a further factor against misleading or deceptive conduct. His Honour considered it reasonable to infer that consumers will take care in carefully assessing the tote bag products before making the purchase. Further, the State of Escape tote bags retailed at a higher price point than the Chuchka bags which was another factor against a likelihood of deception.
There were, however, some instances of promotional representations by Chuchka which were admitted as being misleading or deceptive
SEA also alleged that Schwartz was a joint tortfeasor with Chuchka in respect of the alleged infringements of copyright and acts of passing off, as well as being personally liable as an accessory to Chuchka’s misleading promotional representations. Given the earlier findings, it was only necessary for Davies J to consider the latter allegation which his Honour upheld and found that Schwartz was knowingly concerned with the design and promotion of the Chuchka tote bags. However, his Honour commented, by way of obiter, that he would not have found her a joint tortfeasor with the company on the copyright infringement and passing off claims.
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