Simpsons Solicitors

Folly of the seas?

December 14th 2012

The Federal Court has recently handed down an interesting decision relating to swimwear.

The facts of the case are somewhat convoluted, but in essence:

  • in 2010, after seeing some photos in a magazine, Leah Madden, a swimwear designer, became concerned that the swimwear company Seafolly had copied her swimwear designs;
  • Ms Madden then posted a series of photos – including photos from Seafolly – that compared a number of her pieces with pieces from Seafolly;
  • the text Ms Madden posted with the sets of photos strongly implied that Seafolly had copied her swimwear; and
  • Ms Madden also emailed  a number of journalists, newspapers and fashion magazines with her concerns, attaching comparison photos.

Seafolly became aware of Ms Madden’s claims as a result of media interest stirred up by Ms Madden’s email and Facebook page, and issued a statement rejecting the claims, and stating that some of the relevant costumes had been released by Seafolly before Ms Madden’s range was released, and that the others were already at an advanced development stage by that date.

Seafolly brought action on a number of grounds:

  • for misleading and deceptive conduct under the Trade Practices Act (now covered by the Australian Consumer Law);
  • under “fair trading” legislation in Queensland and New South Wales;
  • for “injurious falsehood”; and
  • for infringing copyright in Seafolly’s photos.

Ms Madden responded by launching counter-claims for defamation and for misleading and deceptive conduct, based on Seafolly’s press releases that she had made the allegations with malicious intent, wanting to damage Seafolly.

The Court found that the Seafolly costumes were original designs created by employees of Seafolly and without reference to Ms Madden’s designs.

Therefore, while Ms Madden may have believed (at the time she posted to Facebook and sent the email) that Seafolly had copied her designs, her choice of language was intended to – and did – convey to readers that Seafolly had, as a matter of fact, copied her designs. Indeed, the Court found that Ms Madden had made the statements not caring whether they were true or false.

The Court rejected Ms Madden’s defence that the statements would be read as mere statements of opinion, and observed that Ms Madden had completely failed to investigate whether the costumes were in fact copied before making her claims, and had completely failed to take any of the “prudent steps” that she might have taken that would have quickly led her to understanding that Seafolly had not, in fact, copied her garments.

As a result, the Court found for Seafolly in relation to the misleading and deceptive conduct claims (including under the State legislation), and awarded it $25,000 damages.

However, Seafolly failed in relation to its claim for “injurious falsehood”. While it could establish most of the bases for this claim, it was unable to establish one crucial factor – any damage flowing from Ms Madden’s statements.

Seafolly also failed on the copyright claim, as it did not own copyright in the photos at the relevant time and – while it had acquired an assignment of the photographer’s right to sue for past infringements – it did not provide any evidence that the photographer had suffered any damage as a result of Ms Madden’s use of the photos. Interestingly, Seafolly had sought damages of $500,000 for use of the photos – a claim that, the Court stated, it would have regarded as “grossly excessive in the circumstances” had it needed to assess damages for copyright infringement.

The Court also dismissed both of Ms Madden’s counter-claims. Insofar as anything said by Seafolly was defamatory, the Court held that it was justified in the circumstances – Ms Madden had made her comments maliciously, and what was said by Seafolly was substantially true. The Court also held that what Seafolly had said of Ms Madden was both relevant and proportionate in protecting its interests, in the face of Ms Madden’s conduct. Seafolly was therefore able to also rely on the defence of “qualified privilege”.

A number of cautionary tales from this case:

  • while Facebook may appear an informal forum, what you say there may have commercial consequences, even if you are just communicating with your “friends”;
  • before making any statements relating to your business (whether on Facebook, in an email or otherwise), always check your facts and think about what steps you can take to establish the facts – particularly if you’re about to bad-mouth a competitor; and
  • insinuating things, and just asking questions in a suggestive way can be just as misleading and deceptive as making statements.

You can read the case at:

http://www.austlii.edu.au/au/cases/cth/FCA/2012/1346.html

If you want advice on copyright and related legal issues, contact copyright lawyer Adam Simpson or Ian McDonald (Special Counsel, Copyright) at Simpsons Solicitors.