#6666 - Colbeam Palmer V. Stock Affiliates - Commercial Remedies BCL

Colbeam Palmer v. Stock Affiliates

Facts

This action is the result of a dispute about the use of the term “Craft Master” as a trade name for articles described as painting sets. The plaintiff, a company incorporated in the United Kingdom, was registered under the Australian Trade Marks Act 1955-1958 as the proprietor of the word trade mark craftmaster, in respect of painting sets included in class 16, for a period of seven years from 11th April 1961.

It appears that at some time early in the 1950s an American company, then known as Palmer Pann Corporation, made and sold painting sets in the United States under the name “Craft Master”. The American company Palmer Pann Corporation later changed its name to Craft Master Corporation. It seems that at one stage before doing so it had a business alliance or association with the plaintiff Colbeam Palmer Ltd. in England, which was apparently an offshoot of it. However that may have been, in or about 1954 the American and English companies decided to go their separate ways each selling its painting sets under the name “Craft Master”. They agreed to divide the world between them each keeping out of the territory of the other. Broadly speaking the Eastern Hemisphere was to be the English company's territory, the Western Hemisphere that of the American company. Australia and New Zealand were apparently left as a kind of no-man's land where each company might make forays.

The defendant is a company incorporated in New South Wales. Its main business is as an importer and wholesale supplier of a variety of goods to retailers. The company seems to be controlled by its founder, Mr. J. A. Winstock. He has been its managing director for thirty years. In 1960 or thereabouts he entered into negotiations with the American company with a view to his company becoming the selling agent—in the inexact commercial sense of that expression—of its Craft Master painting sets in Australia. In the result the defendant company became a regular importer of the American company's goods. These it sold to various retail shops in Sydney.

Mr. Winstock took this advice to mean that as between the American company and the plaintiff there was no agreement that either must keep out of Australia, that each could there use the name Craft Master. He did not know that in 1961 the plaintiff had registered this name as its trade mark in Australia. His company therefore continued trading in the American goods bearing the name Craft Master as the American company had advised him to do. And the plaintiff company took no steps to make known to the defendant or to the trade generally that it had the name Craftmaster as its trade mark or to assert any rights in it until 30th August 1965. A firm of patent attorneys in Melbourne, acting for the plaintiff, then wrote to two retailers to whom the defendant had sold painting sets alleging that these infringed the plaintiff's trade mark.

Holding

Account of Profits and damages

The plaintiff whose mark has been infringed can choose between damages or an account of profits. He cannot have both. They are alternative remedies.

The distinction between an account of profits and damages is that by the former the infringer is required to give up his ill-gotten gains to the party whose rights he has infringed: by the latter he is required to compensate the party wronged for the loss he has suffered. The two computations can obviously yield different results, for a plaintiff's loss is not to be measured by the defendant's gain, nor a defendant's gain by the plaintiff's loss. Either may be greater, or less, than the other. If a plaintiff elects to take an inquiry as to damages the loss to him of profits which he might have made may be a substantial element of his claim: see Mayne on Damages, 11th ed. (1946), p. 71 note. But what a plaintiff might have made had the defendant not invaded his rights is by no means the same thing as what the defendant did make by doing so.

Innocent breach – No account of profits – even if negligent

As to the facts, I am satisfied that the defendant did not know before 30th August 1965 that the plaintiff was the proprietor of the name craftmaster as a registered trade mark in Australia. I accept the evidence of Mr. Winstock. He was, I thought, a truthful, but cautious and somewhat reticent, witness. It may be that he did not before August 1965 make all the inquiries that a more prudent person in his position might have made, and that he was, as he says, in that sense remiss. But a lack of diligence in inquiry does not turn ignorance into knowledge. Dishonesty is not to be inferred from lack of care. This is not a case of “wilful blindness”, the expression used in another context to describe a deliberate abstaining from inquiry from fear of what inquiry might reveal. Moreover for the defendant's ignorance before the end of August 1965 of the plaintiff's registered trade mark the plaintiff must take some responsibility, because it did not earlier assert its rights. I reject the defendant's contention that the plaintiff's dilatoriness amounts to laches altogether barring its rights to an account. Nevertheless I think it is a circumstance to be considered with the rest of the evidence to determine when it was that the defendant first became aware of the trade-mark.

And the account of profits retains the characteristics of its origin in the Court of Chancery. By it a defendant is made to account for, and is then stripped of, profits he has made which it would be unconscionable that he retain. These are profits made by him dishonestly, that is by his knowingly infringing the rights of the proprietor of the trade mark. This explains why the liability to account is still not necessarily coextensive with acts of infringement. The account is limited to the profits made by the defendant during the period when he knew of the plaintiff's rights. So it was in respect of common law trade marks. So it still is in respect of registered trade marks: Edelsten v. Edelsten [1]; Slazenger & Sons v. Spalding & Bros. [2]; Moet v. Couston [3]. I think that it follows that it lies upon a plaintiff who seeks an account of profits to establish that profits were made by the defendant knowing that he was transgressing the plaintiff's rights.

Valuation of the profits – apportionment

It was suggested that the defendant's profit should be measured by the difference between the amount it received for painting sets bearing the trade mark and the amount it had paid to obtain them. The account taken when a patent has been infringed was...