It’s all fun and games until someone goes to jail

What began in 2003 as an action for trade mark and copyright infringement, has in 2010, become a question of contempt of court and jail time.

The applicant, Deckers, manufactures sheepskin footwear under the “UGG” logo.  Deckers sued the Respondents (Farley and Others), alleging that they were manufacturing and selling counterfeit “UGG Australia” boots and in doing so were infringing Deckers copyright and trade marks and engaging in passing off and misleading or deceptive conduct.  Deckers was successful, and in 2007 and 2009 the Federal Court made a range of orders essentially requiring the Respondents to cease the manufacture and sale of sheepskin footwear products bearing the “UGG” logo (Deckers also picked up a handy damages award of approximately $7 million).

This changed things for the Respondents.  Aside from being out of pocket $7 million, the consequences of continuing to manufacture and sell sheepskin footwear under the “UGG” logo had become more severe.  Such conduct could give rise to further damages claims from Deckers – but, more worryingly for the Respondents, it could also constitute contempt of court, which can result in a term of imprisonment (among other things).

The risks associated with infringing Deckers rights had clearly increased; however, establishing breach of a court ordered injunction demands a higher standard of proof than establishing a civil action.   This is because the courts now regard all contempt as criminal in nature, meaning that allegations must be proved “beyond reasonable doubt” (which is a marked step up from the civil standard of proving a case “on the balance of probabilities”).

However, as Deckers showed, the higher standard of proof is not insurmountable.  Despite what Boston Legal has taught us, reasonable doubt cannot be established merely by hiring Alan Shore (or an Australian, real life equivalent – if there is such a thing) to deliver an overly dramatic policy based speech.  In April 2010 Deckers successfully argued that six of the Respondents had deliberately engaged in conduct breaching the orders of the court.  Each was found to be in contempt.  The penalty for contempt (and whether it will include imprisonment, a fine, an award of costs and/or a further injunction) is within the discretion of the court.  In June 2010, while the penalty was still being considered, Deckers successfully brought a further contempt action against one of the six Respondents.

Judgment on the penalty was handed down on 24 June.  Justice Ritchie ordered Vladimir Vaysman, Victoria Vaysman and Leonid Mykhalovskyi to serve 3 years, 12 months and 3 months respectively.  It’s rare to see such a servere sentence in an intellectual property case, and it provides a timely reminder that court orders are not to be taken lightly.  The April 2010 decision can be found here and the June 2010 here.

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