Polo/Lauren Company L.P. v Ziliani Holdings Pty Ltd [2008] FCAFC 195 (18 December 2008)

Last Updated: 19 December 2008

FEDERAL COURT OF AUSTRALIA

Polo/Lauren Company L.P. v Ziliani Holdings Pty Ltd [2008] FCAFC 195

COPYRIGHT – copyright in Polo/Lauren logo – whether logo is a "non-infringing accessory" – whether logo is a label – whether physical or conceptual distinction is required between a label and an article – function performed by the logo – whether the function of a label is to be defined by an objective or subjective assessment – whether the logo can be both a label and a trade mark

COPYRIGHT – secondary infringement – whether defences disclosed in Division 8 of the Copyright Act 1968 (Cth) apply to acts of secondary infringement

COPYRIGHT – whether logo is a "corresponding design" – meaning of "embody" – whether the logo was embodied in the articles

STATUTORY INTERPRETATION – use of dictionary definitions

WORDS AND PHRASES – "label", "embody"


Copyright Act 1968 (Cth) ss 10(1), 37, 38, 44C, 74, 77, 198A(1)

Champagne Heidsieck et Cie Monopole Societe Anonyme v Buxton [1930] 1 Ch 330 referred to
House of Peace Pty Ltd & Anor v Bankstown City Council [2000] NSWCA 44; (2000) 48 NSWLR 498 cited
Koninklijke Philips Electronics NV & Anor v Remington Products Australia Pty Ltd [2000] FCA 876; (2000) 100 FCR 90 cited
Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd & Ors (1991) 25 NSWLR 541 cited
R & A Bailey & Co Ltd v Boccaccio Pty Ltd & Ors (1986) 4 NSWLR 701 referred to
R v Peters (1886) 16 QBD 636 cited
Raben Footwear Pty Ltd v Polygram Records Inc & Anor (1997) 75 FCR 88 cited, applied
The Polo-Lauren Co LP v Ziliani Holdings Pty Ltd [2008] FCA 49; (2008) 75 IPR 143 affirmed


THE POLO/LAUREN COMPANY L.P. v ZILIANI HOLDINGS PTY LIMITED and ADAM ZILIANI
NSD 240 OF 2008

BLACK CJ, JACOBSON AND PERRAM JJ
18 DECEMBER 2008
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 240 OF 2008

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

THE POLO/LAUREN COMPANY L.P. Appellant

AND:	ZILIANI HOLDINGS PTY LIMITED First Respondent ADAM ZILIANI Second Respondent

JUDGES:	BLACK CJ, JACOBSON AND PERRAM JJ
DATE OF ORDER:	18 DECEMBER 2008
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 240 OF 2008

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

THE POLO/LAUREN COMPANY L.P. Appellant

AND:	ZILIANI HOLDINGS PTY LIMITED First Respondent ADAM ZILIANI Second Respondent

JUDGES:	BLACK CJ, JACOBSON AND PERRAM JJ
DATE:	18 DECEMBER 2008
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Introduction

1 The first respondent, Ziliani Holdings Pty Limited, imported into Australia from the United States of America, for the purpose of sale, genuine Polo Ralph Lauren garments. Most, but not all, bore the well-known polo player logo which is a representation of a polo player swinging a mallet whilst astride a cantering polo pony ("the Logo"). Mr Ziliani, who is the principal behind Ziliani Holdings Pty Limited, acquired the garments at various trade fairs in the United States of America where, apparently, last season’s fashions may be purchased at a substantial discount: The Polo/Lauren Co LP v Ziliani Holdings Pty Ltd [2008] FCA 49; (2008) 75 IPR 143 at 146 [18]. It is convenient to refer to Mr Ziliani and his company together as "Ziliani".

2 Ziliani presently sells the garments from a store in Chatswood in Sydney, trading under the name of "Brands 4 Less". At times he has operated two such stores. It will be seen that Ziliani is an arbitrageur exploiting price differences in geographically diverse markets.

3 The appellant, whom we shall call Polo/Lauren, is a limited partnership under the laws of the State of New York. It is in the world-wide business of, inter alia, the distribution of Polo Ralph Lauren merchandise. The existence of Ziliani’s business of selling discount, but genuine, Polo Ralph Lauren garments vexes it. These proceedings concern its efforts to prevent Ziliani from selling such garments from its store in Chatswood. The learned primary judge rejected these attempts. In our opinion, he was correct to do so.

4 Polo/Lauren’s efforts to restrain Ziliani centre on the copyright in the Logo. The figure which comprises the Logo is an artistic work and was conceived by an Italian, Signor Athos Dell Torre, in 1971. Through various hands Polo/Lauren has become the present owner of the copyright in the Logo.

5 The importation into Australia of genuine goods bearing a trade mark legitimately affixed overseas is not an infringement of the local trade mark. Polo/Lauren could not, therefore, claim against Ziliani that by importing the garments into Australia that its trade mark had been infringed: see s 123(1) of the Trade Marks Act 1995 (Cth), and at an earlier time, Champagne Heidsieck et Cie Monopole Societe Anonyme v Buxton [1930] 1 Ch 330.

6 However, the importation into Australia of a copyright work without the permission of the copyright owner is, in certain circumstances of actual or imputed knowledge, an infringement of that copyright: see ss 37 and 38 of the Copyright Act 1968 (Cth) ("the Act"). This kind of infringement is frequently referred to as "secondary infringement". It is by those means that Polo/Lauren seeks to restrain Ziliani from conducting its business.

Issues

7 In this Court there were two issues between the parties. They were:

(a) The Label Issue: Although it is an infringement of copyright to import a copyright work for sale without the permission of the copyright owner that principle is subject to exceptions. If the copyright work is a label which is incorporated into the surface of an article then s 44C of the Act deems there to be no infringement by importation and sale. The first issue is, therefore, whether the Logo is a "label" incorporated into the surface of the garments. If it is, as Ziliani contended, then there can be no infringement of Polo/Lauren’s copyright.

(b) The Design/Copyright Overlap Issue: Ziliani argued that the Logo was capable of being registered under the Designs Act 2003 (Cth) and hence was a "corresponding design" under the Act. If this were so a defence to infringement was made out. Polo/Lauren argued that the defence could only be made out if the design was "embodied in" the garments and that it could not be said that a garment with the Logo on it "embodied" the Logo. Polo/Lauren also argued that the secondary infringement provisions were expressed to be subject only to "Division 3" of the Act and that the "corresponding design" provisions were not contained in that Division. The consequence was said to be that even if the corresponding design defence was made out it could not operate as a defence to secondary infringement.

First Issue: Is the Logo a label?

8 Section 44C provides:

44C Copyright subsisting in accessories etc to imported articles

(1) The copyright in a work a copy of which is, or is on, or embodied in, a non-infringing accessory to an article is not infringed by importing the accessory with the article.

...

(2) Section 38 does not apply to a copy of a work, being a copy that is, or is on, or embodied in, a non-infringing accessory to an article, if the importation of the accessory is not an infringement of copyright in the work.

9 The word "accessory" is defined in s 10 as follows:

accessory, in relation to an article, means one or more of the following: (a) a label affixed to, displayed on, incorporated into the surface of, or accompanying, the article; (b) the packaging or container in which the article is packaged or contained; (c) a label affixed to, displayed on, incorporated into the surface of, or accompanying, the packaging or container in which the article is packaged or contained; (d) a written instruction, warranty or other information provided with the article; (e) a record embodying an instructional sound recording, or a copy of an instructional cinematograph film, provided with the article; but does not include any label, packaging or container on which the olympic symbol (within the meaning of the Olympic Insignia Protection Act 1987) is reproduced.

10 The effect of these provisions is that importation of an article bearing a label does not infringe any copyright in the label.

11 As developed by the parties, this issue involved four distinct questions. These were first, whether the trial judge had concluded, erroneously, that swing tags and internal tags were not within the notion of a label; secondly, whether the concept of a label contemplated a distinction between the label itself and the item labelled; thirdly, whether the Logo was primarily decorative or whether it performed an identifying function and, the relevance of the consumer’s understanding of the nature of the label; finally, whether the primary judge erred by effectively assimilating the notion of a label with the notion of a trade mark.

12 There was no issue between the parties that the Logo was displayed on or incorporated into the surface of the garments. Nor was there any dispute that the garments were in fact "articles" within the meaning of s 44C. Although the parties arrived at opposite conclusions, there was also no disagreement between them that the correct approach to the interpretation of the word "label" in the definition of "accessory" was to give it its ordinary meaning. Both parties correctly insisted that the process of statutory construction had to take account of the relevant statutory language and the context in which the word "label" appeared and that the correct interpretation is one which promotes the purpose or object underlying the Act: see s 15AA of the Acts Interpretation Act 1901 (Cth). They differed only in their application of these principles.

First Question – The relevance of swing tags and internal tags

13 Polo/Lauren pointed to a passage in the primary judge’s reasons in the following terms (Polo/Lauren [2008] FCA 49; 75 IPR 143 at 156-157 [48]):

Mr Ziliani said that in his experience in the clothing trade, clothing marketed under a particular name or trade mark, such as GUCCI, CALVIN KLEIN, VERSACE, POLO, PETER MORRISSEY and the like, was generally referred to as being clothing sold under or from a particular "label". Mr Ziliani said that by referring to "well-known clothing labels" he meant the brand of a particular line of clothes. Of course, he appreciated that an item of clothing also could have a physical label which contained a brand name of the maker.

14 It submitted that the trial judge rejected the meaning conveyed in the second sentence just quoted. This was said to be particularly inappropriate given that the use of the words "[o]f course" at the beginning of that sentence indicated that that usage was an unexceptional one. It was submitted that in relation to garments the word "label" generally referred to the swing tag or the internal tag attached to them. Polo/Lauren submitted that his Honour must have rejected that meaning of the word "label" in coming to the conclusion that the Logo was a label.

15 Ziliani pointed out, correctly in our opinion, that this involved a non sequitur since a garment may have more than one label. Accepting for the moment that swing tags and internal tags are labels within the meaning of the definition, such an assumption says nothing about whether the Logo is a label. Further to conclude, as his Honour did, that the Logo was itself a label did not involve, as Polo/Lauren’s submissions impermissibly assumed, that swing tags and internal tags were not also labels. This argument should be rejected.

Second Question – The distinction between the label and the labelled

16 Polo/Lauren submitted that the words "in relation to" where appearing in the definition of "accessory" in s 10(1) of the Act meant that the label referred to in subsections (a) and (c) of that definition necessarily connoted an association between the label and the article labelled which maintained the conceptual distinction between them. That interpretation was supported, so it was said, by the use in subsection (a) of the words "affixed to", "displayed on", "incorporated into" and "accompanying". Polo/Lauren was careful to disclaim any suggestion that the label had to be physically separate from the article with which it was associated for, as Ziliani correctly submitted, that would be inconsistent with the words "incorporated into the surface". What was required, therefore, was not physical but rather conceptual distinctiveness. Physical distinctiveness might be observed between, for example, a bottle of perfume and the fragrance contained therein or between a bottle of liquor and the label appearing on the bottle. Conceptual distinctiveness was more elusive but, whatever its boundaries might be, it was not present where a logo was an essential part of the article upon which it appeared. Mr Burley SC, in his careful and succinct argument, submitted that the Logo was so integral and essential to the clothing in question that neither meaningfully maintained its identity without the other. As Mr Burley put it, a Polo shirt without the Logo is just not a Polo shirt.

17 Mr Cobden SC submitted that this approach to the word "label" paid too little attention to the words "incorporated into the surface of" the article. There was, so he submitted, no escaping from the fact that the Logo was "incorporated into the surface of" the garments. Of course Ziliani accepted, and Polo/Lauren submitted, that not everything which was incorporated into the surface of an article became thereby a label. It could not follow, therefore, that just because the Logo was incorporated into the surface of the garments in question that it was a label.

Consideration

18 In his poem "Among School Children", William Butler Yeats asked "how can we know the dancer from the dance?" It seems to us that Mr Burley’s argument that a label cannot be consubstantial with the article to which it is affixed raises the same point, albeit somewhat more prosaically. There is no doubt, we think, that the definition of "accessory" exhibits in its language an assumption that whatever else is comprehended by the expression "label" that notion is distinct, albeit not necessarily in a physical sense, from the article with which it is associated. So much is plain from the use of expressions such as "affixed to", "displayed on" and "incorporated into the surface of". Further, that view is consistent with the mischief at which the introduction of s 44C was directed. That mischief was the decision of Young J in R & A Bailey & Co Ltd v Boccaccio Pty Ltd & Ors (1986) 4 NSWLR 701. In that case, the defendants were vendors in Australia of imported bottles of Baileys Original Irish Cream upon which were affixed labels in which copyright subsisted. The local owner of that copyright sued to prevent the importation of the bottles on the ground that it was a secondary infringement of its copyright. Young J upheld this contention.

19 Two years later the Copyright Law Review Committee published its report "The Importation Provisions of the Copyright Act 1968". The Committee noted the Bailey case at p 28, [25]. It went on to say at pp 224-226, [181]-[183]:

181. The Committee is strongly of opinion that distributors of goods should not be able to control the market for their products by resorting to the subterfuge of devising a label or a package in which copyright will subsist. The purpose of copyright is to protect articles which are truly copyright articles such as books, sound recordings or films. This purpose is achieved by conferring on authors of works and makers of subject matter a bundle of exclusive rights entitling them to restrain conduct antipathetical to their incorporeal property and to sue for damages where such conduct has already been committed. If the simple expedient of affixing or attaching a label in which copyright subsists to any goods at all entitles the owner of the goods to exclude others from marketing similar goods, the sooner the practice is stopped the better it will be. However imaginatively labelled or packaged a bottle of liquor may be, the product is liquor. The same may be said of cigarettes, perfume and cosmetics. In the Committee’s opinion it would be quite wrong to allow the present position to continue. Abuses which may occur can be remedied by resort to causes of action for passing-off, for breaches of s. 52 of the Trade Practices Act or for infringements of the Trade Marks Act 1955. If the Trade Marks Act requires amendment to confer adequate protection, that is a matter for consideration in a different form of inquiry.

182. In the course of its consideration of this aspect of the Reference, the Committee has considered whether any product labelling or packaging should be capable of being used for the purpose of controlling a market in copyright articles. In other words, should the fact that copyright subsists in a label attached to a copyright article, for example, a book or a sound recording, be permitted to have some effect on the control of the marketing of such an article. The Committee has reached the conclusion that this also should be prevented. There is no evidence before the Committee of any such abuse taking place, but the amendment which the Committee recommends should cover product labelling in packaging of all goods whether copyright articles or not.

183. In summary then the Committee recommends that ss. 37 and 38 should be repealed insofar as they apply to labelling and packaging of all goods of whatever kind.

20 Although Parliament did not implement the Committee’s proposed solution it is plain that it regarded itself as addressing the problem identified by the Committee. So much appears from the explanatory memorandum accompanying the Copyright Amendment Bill 1997 (Cth) which, under the heading "Problem Identification and Specification of Regulatory Objectives" in Schedule 3, said:

In 1988 the CLRC reviewed the importation provisions of the Copyright Act. It concluded that, whatever the merits of importation rights over copyright goods, the ability to use the copyright protected material attached to or used in relation to goods that would not attract copyright protection in the market "in their own right" to gain control over the right to import and market such goods in Australia, did not fit within the framework of a proper exercise of copyright.

21 Inherent, therefore, in the notion of a label is the notion that it is possible to speak of it "in its own right". We infer from that that the Committee assumed that a label had a separate existence from the article with which it was associated. For that reason, we would accept that a label and the articles with which it is associated must be conceptually distinct. The situation is analogous to, although not identical with, the requirement in trade mark law that the trade mark be distinct from the article to which it is affixed: see Koninklijke Philips Electronics NV & Anor v Remington Products Australia Pty Ltd [2000] FCA 876; (2000) 100 FCR 90 at 102-104 [14]- [16] per Burchett J, 116 [48] per Hill J and 116 [49] per Branson J.

22 Accepting the need for that distinction however does not assist Polo/Lauren. Whilst there is obvious force in the proposition that the Logo is very closely associated with the garments, we do not think that the Logo and the garments are so inextricably bound up in each other’s identity that they have ceased to be distinct. In that regard, it is not sufficient for present purposes to demonstrate that the Logo is an important element in, or an integral aspect of, the garments. It is only when the label and the labelled are conceptually indistinguishable that the former loses its quality as a label. However important or integral the Logo is to the garments, it and they remain distinct.

Third Question – The function argument

23 The learned primary judge considered a number of dictionary definitions in the following terms (Polo/Lauren [2008] FCA 49; 75 IPR 143 at 157 [49]):

Likewise, the Collin’s English Dictionary 3rd Aust ed, Harper Collins, 1991gives the following definitions of the noun "label":

1. a piece of paper, card or other material attached to an object to identify it or give instructions or details concerning its ownership, use, nature, destination, etc.

...

4. a trademark or company or brand name on certain goods ... [Emphasis added]

The Macquarie Dictionary (online edition) defines "label" as including:

1. a slip of paper or other material for affixing to something to indicate its nature, ownership, destination, etc.

...

5. a trade name, especially of a recording company in the music industry.

24 It is convenient to pause to consider the assistance that dictionary definitions, if any, provide to such questions of statutory interpretation. The common law has long approved of dictionary definitions to assist in statutory interpretation (see eg R v Peters (1886) 16 QBD 636 at 641 per Lord Coleridge CJ), but while this is a useful reference point, and indeed the approach taken by the learned first instance judge and by counsel, a dictionary definition is not conclusive and must be used with caution. As Mason P in House of Peace Pty Ltd & Anor v Bankstown City Council [2000] NSWCA 44; (2000) 48 NSWLR 498 noted at 505 [28]:

A dictionary may offer a reasonably authoritative source for describing the range of meanings of a word, including obsolete meanings. Dictionaries recognise that usage varies from time-to-time and place-to-place. However, they do not speak with one voice, even if published relatively concurrently. They can illustrate usage in context, but can never enter the particular interpretive task confronting a person required to construe a particular document for a particular purpose.

See also Mahoney JA in Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd & Ors (1991) 25 NSWLR 541 at 560.

25 The present case provides a good example of this difficulty. The Court has been referred to several definitions of "label" and, unsurprisingly, from this selection counsel for each of the parties has been able to find a definition supporting their opposing arguments.

26 Polo/Lauren argued that these definitions required that a label had to have a function that usually, but not invariably, was one of identification. Polo/Lauren submitted that "[a]s a matter of language the label will have the characteristic of conveying instructions or details concerning the ownership, use or nature of the item." The Logo could not, so it was submitted, have that characteristic since it was primarily decorative. Further, Polo/Lauren submitted that the learned primary judge (Polo/Lauren [2008] FCA 49; 75 IPR 143 at 159 [60]) erred when focusing on the "practical effect" of the Logo. It was submitted that the Logo could only have the practical effect of identifying the garments as being associated with Polo/Lauren if a consumer knew that the Logo connoted a connection with Polo/Lauren. Without such knowledge, the Logo was merely a rider on a horse with a stick, symbolising nothing. Polo/Lauren posited that whether something was a label or not could not depend on the states of mind of consumers. Such a focus, it was said, was more apposite to the tort of passing off and proceedings under the Trade Practices Act 1974 (Cth).

27 We do not accept that the Logo is purely decorative. It also has a function. The primary judge found (Polo/Lauren [2008] FCA 49; 75 IPR 143 at 154 [39]) that "the [Logo] has considerable significance in identifying clothing as emanating from the Ralph Lauren group". Subject to the trade mark issue, which we will consider below, it is clear that the Logo, which also may be accepted as decorative, at least served the function of identifying those clothes with Polo/Lauren.

28 In our view, a functional test reflects the natural and ordinary meaning of the word "label" as it appears in the Act. The character of an object can be determined by its evident function and such is the case with a label. A label can have many functions – such as conveying information about the size of a garment, washing instructions or origin. At the most basic level, a label performs an "identifying" function. In the context of the Act, we would read "label" as including something that in fact identifies an object. The assessment of function is objective. It does not depend upon the putative labeller’s intention or the understanding of consumers. That is not to say that these considerations will be irrelevant; rather they are factors that may very well be taken into account in determining whether something performs the function necessary for its characterisation as a label.

29 The Logo is conceptually distinct from clothing on which it is embroidered and it identifies clothing as "emanating from the Ralph Lauren group". We think it highly improbable that this identification is accidental or unintentional, but whatever the intention, the primary judge found the Logo in fact identifies a connection with Polo/Lauren. This functional element is sufficient to make it clear that the Logo is a label for the purpose of Act.

Fourth Question – The trade mark issue

30 Polo/Lauren submitted that his Honour had effectively interpreted the expression label to mean trade mark. This submission is correct. His Honour said (Polo/Lauren [2008] FCA 49; 75 IPR 143 at 157 [51]):

I am satisfied that a natural and ordinary English meaning of the word "label" includes a brand name, trade mark and the name by which a design or fashion house, and its product, such as "Polo" and "Ralph Lauren" and "Polo Ralph Lauren", is generally known.

31 In our view, the word "label" as it is used in the Act is intended to connote something physical, although as we have said, a label need not be physically distinct from the object labelled. A trade mark, of course, is an intangible property right; for this reason, we do not think "label" in the statutory context simply means "trade mark" in the statutory sense. Nonetheless, where a trade mark is physically manifested and incorporated into an article, as the Logo is here, the trade mark is being used to identify the article with its source. Its purpose is to label the goods; it is a label.

32 Trade marks cannot be used to prevent the importation of goods where the mark has been applied to the goods with the consent of the registered owner: see s 123(1) of the Trade Marks Act 1995 (Cth). The Copyright Act 1968 (Cth) is concerned only with labels in which copyright subsists. But where, as in the present case, there is copyright in a trade mark, and the trade mark is physically manifested and incorporated into an article so as to identify the article as that of the putative labeller, the copyright work is being used as a label. That was the situation in the Bailey case. This is the difficulty that Polo/Lauren cannot escape.

33 Further, if the concept of a "label" had excluded from it anything that was a trade mark this would mean that a trade mark could be used to control the importation of goods where copyright subsisted in it, but not otherwise. It is difficult to identify the attractive features of such a state of affairs, still harder to discern a principled underpinning for it. The Copyright Law Review Committee expressly contemplated in its suggested amendments that trade marks would be covered by the labelling exemption. It is true that its proposed legislation was not ultimately enacted but it serves nevertheless as recognition that the mischief aimed at included that kind of use of trade marks. Indeed, the label in the Bailey case, in which copyright inhered, was also a trade mark, a difficulty that the current argument overlooks.

34 There are other problems too. Although its terms are presently inapplicable, s 198A of the Act assumes a relationship between trade marks and copyright which tells against, rather than speaks for, the notion that copyright might be used to control the importation of goods so long as the copyright work forms part of a trade mark. Section 198A provides:

198A Non-infringement of trade mark in relation to the importation of copyright material

(1) A person who uses a registered trade mark in relation to imported goods that are similar to goods in respect of which the trade mark is registered does not infringe the trade mark if:

(a) the importation would have constituted an infringement of copyright except for the operation of a parallel importation provision; and

(b) the trade mark was applied to, or in relation to, the goods before the importation (whether the mark was applied before or after the commencement of this section); and

(c) the trade mark was applied by, or with the consent of:

(i) a person who, at the time the mark was applied, was the registered owner of the mark; or

(ii) a person who, at the time the mark was applied, was the owner of the mark in the place where the mark was applied and who had been a registered owner of the mark at any time before then.

(2) Unless the contrary intention appears, an expression used in this section has the same meaning as in the Trade Marks Act 1995.

(3) In this section:

parallel importation provision means:

(a) section 44D, 44E, 44F, 112D or 112DA; or

(b) section 44C or 112C (in so far as that section applies in relation to an accessory to an article of the kind mentioned in subsection 10AD(1)).

35 It might reasonably be expected that if the copyright in a trade mark could be used as Polo/Lauren suggests, that such a trade mark would be infringed by the kind of importation referred to in s 198A. The fact that that provision provides the precise opposite of that conclusion strongly suggests that the supposed limitation does not exist. There is, in our opinion, no reason why a label within the meaning of the definition of "accessory" cannot be or contain a trade mark.

Conclusion on label issue

36 In those circumstances, the better view is that the Logo, as affixed to the garments in question, is a label within the meaning of the definition of "accessory" in s 10(1) of the Act. The necessary consequence of that conclusion is that the appeal must be dismissed. That makes it strictly unnecessary to consider the remaining argument. However, out of deference to the extensive submissions which were made, it is appropriate to record our views on it.

Second Issue: The design/copyright overlap

37 Division 8 of Part III regulates the interaction between copyright protection and design protection. Ziliani contended that the Logo as it appeared on the garments was a "corresponding design" within the meaning of Division 8 of Part III. If that were correct it meant that if any person had manufactured the garments with the Logo on them it would not have been an infringement of the copyright in the Logo. There were two questions between the parties:

(a) The Availability Question: Ziliani argued, and Polo/Lauren denied, that the making out of this defence could be a defence to an allegation of secondary infringement under ss 37 and 38.

(b) The Three Dimensional Embodiment Question: Polo/Lauren contended that Division 8 of Part III only applied to three dimensional embodiments of an artistic work. The Logo, as incorporated into the garments, was neither three dimensional nor did the garments amount to an embodiment of it.

(a) The Availability Question

38 Sections 37 and 38 of the Act provide:

37 Infringement by importation for sale or hire

(1) Subject to Division 3, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, without the licence of the owner of the copyright, imports an article into Australia for the purpose of:

(a) selling, letting for hire, or by way of trade offering or exposing for sale or hire, the article;

(b) distributing the article:

(i) for the purpose of trade; or

(ii) for any other purpose to an extent that will affect prejudicially the owner of the copyright; or

(c) by way of trade exhibiting the article in public;

if the importer knew, or ought reasonably to have known, that the making of the article would, if the article had been made in Australia by the importer, have constituted an infringement of the copyright.

(2) In relation to an accessory to an article that is or includes a copy of a work, being a copy that was made without the licence of the owner of the copyright in the work in the country in which the copy was made, subsection (1) has effect as if the words "the importer knew, or ought reasonably to have known, that" were omitted.

38 Infringement by sale and other dealings

(1) Subject to Division 3, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, in Australia, and without the licence of the owner of the copyright:

(a) sells, lets for hire, or by way of trade offers or exposes for sale or hire, an article; or

(b) by way of trade exhibits an article in public;

if the person knew, or ought reasonably to have known, that the making of the article constituted an infringement of the copyright or, in the case of an imported article, would, if the article had been made in Australia by the importer, have constituted such an infringement.

(2) For the purposes of the last preceding subsection, the distribution of any articles:

(a) for the purpose of trade; or

(b) for any other purpose to an extent that affects prejudicially the owner of the copyright concerned;

shall be taken to be the sale of those articles.

(3) In this section:

article includes a reproduction or copy of a work or other subject-matter, being a reproduction or copy in electronic form.

(Emphasis added.)

39 Polo/Lauren submitted that the defences available under Division 8 of Part III have no application to ss 37 and 38 because those sections are expressed to be "[s]ubject to Division 3". Polo/Lauren also submitted that s 77(2) of the Act only provides a defence to an actual reproduction in Australia, and is not concerned with, and is inapplicable to, the importation into Australia of products made by or on behalf of the copyright owner. Ziliani submitted that the emphasised words in ss 37 and 38 required the posing of a question about whether a hypothetical act of manufacture would have been an infringement of the copyright. It would be absurd, so it argued, to answer that question solely by reference to Division 3.

40 Ziliani’s submissions are to be preferred. Sections 37 and 38 both require asking whether a hypothetical manufacture was an infringement. As Lehane J noted in Raben Footwear Pty Ltd v Polygram Records Inc & Anor (1997) 75 FCR 88 at 106, the words "if the importer knew, or ought reasonably to have known, that the making of the article would, if the article had been made in Australia by the importer, have constituted an infringement of the copyright":

... are to be read as, in effect, deeming the actual importation to have been a making in Australia (such a making might have constituted an infringement, whereas but for [ss 37 and 38] an importation would not) so that the circumstances, knowledge of which is relevant, are, or at least include, those of the deemed making (actual importation).

41 As ss 37 and 38 "deem" the importation or subsequent dealing of the article to be the actual making of the article, all defences that are applicable to primary infringement (ie infringement under s 36 of the Act) such as those contained in Division 8 are necessarily available. Polo/Lauren’s submissions would require the existence of that infringement to be gauged solely by reference to Division 3. But ss 37 and 38 do not use the expression "subject only to Division 3". Those words would be necessary to ensure that the sections operated as Polo/Lauren contends. Without the word "only" it becomes a question of construing ss 37 and 38, on the one hand, and Division 8 of Part III on the other, in a way which is consistent. We see no reason why the concept of infringement in ss 37 and 38 should be construed as if the rest of the Act outside of Division 3 of Part III did not exist. It does not appear to say that and there is no obvious reason why it should be so construed.

42 The argument should be rejected for another reason too: the italicised portions (above at [38]) were present before the words "[s]ubject to Division 3" were inserted. On Polo/Lauren’s view, the italicised words must have changed their meaning when those amendments were made, an outcome which we find impossible to embrace. It follows that the words "[s]ubject to Division 3" should not be seen as qualifying the word "infringement" in ss 37(1) and 38(1). In our opinion, the defences disclosed in Division 8 are available as matters going to the knowledge requirements of ss 37 and 38.

(b) The Three Dimensional Embodiment Question

43 Division 8 of Part III is headed "Designs". For present purposes there are two pertinent provisions. The first of these is s 74 which provides:

74 Corresponding design (1) In this Division:

corresponding design, in relation to an artistic work, means visual features of shape or configuration which, when embodied in a product, result in a reproduction of that work, whether or not the visual features constitute a design that is capable of being registered under the Designs Act 2003.

(2) For the purposes of subsection (1):

embodied in, in relation to a product, includes woven into, impressed on or worked into the product.

44 The second is s 77 which provides (relevantly):

77 Application of artistic works as industrial designs without registration of the designs

(1) This section applies where:

(a) copyright subsists in an artistic work (other than a building or a model of a building, or a work of artistic craftsmanship) whether made before the commencement of this section or otherwise;

(b) a corresponding design is or has been applied industrially, whether in Australia or elsewhere, and whether before or after the commencement of this section, by or with the licence of the owner of the copyright in the place of industrial application; and

(c) at any time on or after the commencement of this section, products to which the corresponding design has been so applied (the products made to the corresponding design) are sold, let for hire or offered or exposed for sale or hire, whether in Australia or elsewhere; and

(d) at that time, the corresponding design is not registrable under the Designs Act 2003 or has not been registered under that Act or under the Designs Act 1906.

...

(2) It is not an infringement of the copyright in the artistic work to reproduce the work, on or after the day on which:

(a) products made to the corresponding design are first sold, let for hire or offered or exposed for sale or hire; or

(b) a complete specification that discloses a product made to the corresponding design is first published in Australia; or

(c) a representation of a product made to the corresponding design and included in a design application is first published in Australia;

by embodying that, or any other, corresponding design in a product.

...

45 Ziliani’s argument was straightforward. Using the language of s 74 it submitted that the Logo is a visual feature of shape or configuration which when woven or worked into each garment results in a reproduction of the Logo. It was said therefore that the plain language of s 74(1) supported the submission that the Logo is a corresponding design.

46 Polo/Lauren submitted, however, that the language of s 74 has a statutory history which reveals that the expression "visual features of shape or configuration" refers to a situation in which a three dimensional design is embodied in an article. Ziliani submitted that the Logo as it appeared on the garments was three dimensional by reason of it being constituted by embroidery made up of the 784 stitches which protruded, albeit slightly, from the surface of the garments. Secondly, Ziliani submitted that the words of s 74(2) showed that the embodiment could include a design which was "woven into, impressed on or worked into the product" and that the Logo answered that description.

47 The learned primary judge concluded (Polo/Lauren [2008] FCA 49; 75 IPR 143 at 165 [84]) that the 784 stitches making up the Logo were sufficiently three dimensional to amount to visual features of shape or configuration and that, in consequence, the defence under s 77 could be made out.

Consideration

48 Ziliani’s submissions should be rejected and those of Polo/Lauren accepted on this issue for three reasons. First, subject to one matter, it is clear that the amendments to s 74 introduced by the Designs (Consequential Amendments) Act 2003 (Cth) were not intended to change the understanding that copyright protection was not available for three dimensional renditions of designs but was available when a design was exploited in two dimensions. That distinction had been achieved in the preceding version of s 74 in a way which was clear. It provided:

74 Corresponding design

In this Division:

corresponding design, in relation to an artistic work, means a design that, when applied to an article, results in a reproduction of that work, but does not include a design consisting solely of features of two-dimensional pattern or ornament applicable to a surface of an article.

49 The words "pattern or ornament" were drawn from designs law and connoted a two dimensional concept. There was also a corresponding notion of "shape or configuration" which was used to refer to the embodiment of a design in three dimensions. The Australian Law Reform Commission conducted a review of the designs legislation and produced Report No 74, "Designs", which amongst other things considered the interaction between copyright and design protection. At [17.6] it considered the operation of the then ss 74-77 and there summarised their effects in the following terms:

Operation of current overlap provisions. Sections 74-77 provide a defence to a copyright infringement action by providing that some uses of an artistic work do not infringe copyright in that work. In summary, s 74 defines ‘corresponding design’, s 75 removes copyright protection when a corresponding design is registered under the Designs Act, s 76 applies where a design had been falsely registered and s 77 provides a defence to copyright infringement where an artistic work has been industrially applied but not registered as a design or is not registrable. The possibility of dual protection is limited to two dimensions or surface designs. Works of artistic craftsmanship, building and models of buildings also retain copyright protection but only if they are not registered as designs. Strictly therefore they do not receive dual protection. The effects of s 74-77 are as follows: ● Two-dimensional designs continue to receive copyright protection as artistic works under the Copyright Act when applied as surface designs to articles, to the extent that those design features reproduce the artistic works. If the design is also registered under the Designs Act then dual protection is given. ● The copyright in a two-dimensional artistic work continues to be infringed by a two-dimensional copy of that work made in the course of industrial application, that is, ‘plan-to-plan copying’. ● Three-dimensional articles retain copyright protection only if they are works of artistic craftsmanship or buildings or models of buildings. However copyright protection is lost if these items are registered as designs. ● In other cases, copyright protection for artistic works applied as three-dimensional designs is effectively forfeited if the corresponding design is commercially produced.

50 It went on to say at [17.7]:

The distinction between two and three dimensions. The right to copyright and design protection for an article need not be linked to whether it has two or three dimensions. However designs applied to the surface of products usually have an aesthetic purpose, while designs applied as the shape of products usually have an industrial purpose. The dimensional criterion is also said to be objective and reasonably certain. The ‘rough justice’ of the distinction has largely achieved the policy objective of s 74-77. The widely accepted policy is that artistic works that have been applied as three-dimensional designs should generally be denied copyright. It is also accepted that artistic works that have been commercially exploited in basically two-dimensional form should continue to receive copyright protection as artistic works. The Commission supports the policy underlying s 74-77 and the level of that protection. However the amendments effected by s 74-77 have proved uncertain in operation and need simplification and legal clarification. The CLRC will also examine the effect of the amendments in the course of its copyright inquiry.

51 That understanding was consistent with established views as to the operation of designs legislation. Thus in Howe M, Russell-Clarke and Howe on Industrial Designs (7th ed, Sweet & Maxwell Ltd, 2005) the learned authors were able to say (at p 76):

Thus a design must consist either of a shape which is in three dimensions, or of a pattern which is in two dimensions, and that shape or pattern must be applied to an article or articles. An article can quite well exist without any pattern upon it, whereas it can have no existence at all apart from its shape or configuration. Thus, where the design is for a shape, it is really applied to the article by being incorporated into it, rather than applied to it in the literal sense of the word. As Lindley L.J. put it in Re Clarke’s Registered Design [(1896) 13 R.P.C. 351 at 359]:

A design applicable to a thing for its shape can only be applied to the thing by making it in that shape.

52 When the Designs (Consequential Amendments) Act 2003 (Cth) was passed it replaced the preceding definition in s 74 with the current one. Relevantly for present purposes it is to be noted that the explicit reference to a two dimensional pattern or ornament was deleted and, equally importantly, that the expression "when applied to an article" was replaced with the expression "when embodied in a product". The explanatory memorandum accompanying the Designs (Consequential Amendments) Bill 2003 (Cth) placed emphasis on the notion that the amendment continued the policy of focusing on the three dimensional aspects of the design. The explanatory memorandum went on to say (at [12]-[15]):

12. Another difficultly with the definition of "corresponding design" that is to be replaced was its exclusion of a design consisting solely of features of two-dimensional pattern or ornamentation applicable to the surface of an article. This exclusion was intended to give effect to the policy that artistic works when exploited as two-dimensional "surface" designs.

13. However, there was doubt about how the exclusion related to a design that was not strictly applied to the surface but formed part of an article such as texture designs, bas-relief, embroidery, weaves and knits. Designers and textile manufacturers therefore could have been uncertain as to whether their designs would receive copyright protection or should be registered as designs.

14. This amendment, together with the changes made at item 2, clarifies that visual features can be embodied in a product by being woven into, impressed on or worked into the product. That is, a "corresponding design" can include artistic works exploited in products such as tapestries, knitted items and carpets. The amendments therefore clarify the circumstances where copyright protection will be lost and design registration would be necessary for a corresponding design to receive statutory protection. For example, artistic works will not have copyright protection (when used as a design) if a corresponding design is not registered but is industrially applied – unless they are works of artistic craftsmanship, buildings or models of buildings.

15. Under the amended definition, artistic works exploited in two dimensions as visual features of pattern or ornamentation will remain excluded from the definition of "corresponding design" and therefore retain copyright protection.

(Emphasis added.)

53 A similar conclusion had been reached by the Senate’s Economic Legislation Committee in its report into the provisions of the Designs Bill 2002 (Cth) and the Designs (Consequential Amendments) Bill 2002 (Cth) which was the immediate predecessor to the bill just under consideration. At [2.4] the Committee said this:

In relation to this overlap the underlying policy of sections 74 to 77 is that commercially exploited artistic works as three-dimensional designs – for example, articles, objects, etc. – be denied copyright protection but that commercially exploited artistic works as two-dimensional designs – for example, drawings – be provided copyright protection.

54 For those reasons it is plain, we think, that the definition of "corresponding design" is intended to cover a situation where an artistic work is embodied in three dimensions.

55 Ziliani relies upon the words "woven into", "impressed on" or "worked into the product" to show that something may be sufficiently three dimensional merely by being woven into another thing. Those words in s 74(2) were added by the Designs (Consequential Amendments) Act 2003 (Cth). Paragraphs 14 and 15 of the explanatory memorandum show that a debate as to whether objects such as carpets and bas-relief, whose qualities as a design might arguably be seen as either two or three dimensional, was to be resolved by requiring those objects to be protected under the designs legislation. We do not think that it was intended thereby to remove the requirement that the article "embody" the design. This is so both because there is the absence of an indication of an intention on the part of Parliament that that notion was to be removed and because the language of ss 74-77 exhibits textual examples which show that the relationship between the corresponding design and the article is one of embodiment rather than application. Section 74(1) uses the word "embody" as does s 77(2). The word "embody" is defined in the Shorter Oxford Dictionary on Historical Principles (6th ed, Oxford University Press, 2007) to mean:

1. Provide (a spirit) with a bodily form. 2. Unite into one body or mass; incorporate in a larger whole. Include as a constituent part. 3. Give a material or corporeal character to (what is spiritual). 4. Give a material or discernible form to (an abstract principle, concept, etc); express (such a principle etc.) in such a form. Of a material or actual thing or person: be an embodiment of (an abstract concept, quality, etc.) 5. Form (people) into a body, esp. for military purposes. Form or join a (military) body. 6. Coalesce, form a homogeneous mass. (Emphasis added.)

56 Whilst it is possible that the word "embody" can mean, effectively, "include as a constituent element", we do not think, given the background to the provisions, that that is what it means in ss 74-77. Rather, in the cases with which ss 74-77 are concerned, it means "give a material or discernible form to an abstract principle or concept" – the relevant abstract principle or concept is the design itself. Once that is accepted as the meaning of "embody" in ss 74-77 there is no warrant for giving it the additional meaning "include as a constituent element" – such a reading would be inconsistent with the language and history of the provisions.

57 Those observations are sufficient to dispose of Ziliani’s argument without having to resolve whether the Logo is three dimensional or not. The Logo is not embodied in the garments in the requisite sense. In those circumstances, had it been material we would have been of the view that the making by Ziliani of the garments in Australia would have been an infringement of the copyright in the Logo and that no defence could be made out under s 77. Had such a defence been made out, however, it would have been relevant to the question of infringement under ss 37 and 38.

58 Finally, it is useful to note that had Polo/Lauren succeeded in showing that the Logo was not a label because the Logo and the garments were not conceptually distinct, it is probable that it would have failed on the corresponding design issue. This is because that conclusion would have entailed that the garments embodied the label. Put another way, neither party could win both the label argument and the corresponding design argument because the garments could not logically, at the one time, both "embody" the Logo and be conceptually distinct from it.

Conclusions

59 The appeal should be dismissed. Mr Cobden appeared pro bono publico and very properly submitted that there should be no order as to costs. The Court should record its gratitude to him for so appearing and to all counsel for the clarity and utility of their submissions.

I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Black and the Honourable Justices Jacobson and Perram.

Associate:

Dated: 18 December 2008

Counsel for the Appellant:	Mr S C G Burley SC and Mr J S Cooke
Solicitor for the Appellant:	Davies Collinson Cave Solicitors
Counsel for the Respondents:	Mr R Cobden SC (pro bono)

Date of Hearing:	18 August 2008
Date of Judgment:	18 December 2008