Passing off wins over delay

The Federal Court has recently provided some guidance on how damages will be assessed in passing off cases.

Winnebago- the well-known American manufacturer of RV’s – successfully sued Australian RV manufacturer Knott Investments for passing off back in 2010.

By way of a short history of the matter, back in 1978 Knott Investments, without Winnebago’s permission, began manufacturing and selling RV’s with the Winnebago logo. These RV’s were substantially identical in form to the US RV’s.

In 1985, Winnebago became aware of Knott’s actions, however the company did not attempt to rectify the issue until 1991. A ‘settlement’ agreement was reached in 1992, maintaining Winnebago’s rights in Australia, but also allowing Knott limited rights to for ongoing use of the Winnebago trade mark in Australia.

However, in 2010 Winnebago decided to expand its business to Australia and took steps seeking Knott to cease any further use of its trade mark or logo in Australia, commencing proceedings in the Federal Court alleging misleading and deceptive conduct and passing off. The Court found that Knott had engaged in passing off, and gave orders restraining Knott from using the Winnebago mark in future.

In 2013, Knott appealed, and while the Court upheld its finding of passing off, the order restraining the use of the Winnebago marks was overturned due to the long delay by Winnebago in bringing its action. The Court also held that any continued use of the marks would be subject to a disclaimer notice on the vehicles stating that there is no association with the American vehicles.

The most recent decision in this long-running dispute related to how to calculate damages in a passing off case. In December 2015, the Federal Court ruled that the ‘user principle’ should apply – being an assessment of reasonable royalty or licence fee in respect of the use of the mark in the relevant period.

Winnebago had contended that the user principle should not apply in cases where a licence to use the mark would not have been granted, and that instead, the Court should look to the damage suffered by Winnebago through the wrongful use of the mark and the benefit derived by Knott Investments from that wrongful use. The Court rejected that approach.

Use it or lose it? The case serves as a good reminder to be active and prompt when enforcing rights against an infringing party and also confirms that the user principle will apply in the assessment of damages for passing-off cases in Australia.