Madden had falsely accused Seafolly of copying her designs. However, an unresolved part of that dispute concerned a series of misleading social media posts and press releases made by both Seafolly and Ms. Madden; a dispute which formed cross-claims in the main proceeding.

An award of $40,000 in damages for misleading and deceptive conduct has been made in favour of Ms. Madden.

The history of the cross-claim

Madden had posted on her Facebook page that Seafolly had copied her designs: “Seriously, almost an entire line-line ripoff of my Shipwrecked collection.” She also posted photographs of her “White Sands” bikini designs contrasted with Seafolly designs underneath a heading “The most sincere form of flattery?”

While Seafolly had not copied her designs – Seafolly’s immediate response in two press releases was misleading and deceptive, and Ms. Madden was therefore awarded damages.

The first, sent to popular online Australian blog/news providers Pedestrian.TV and Ragtrader on September 2, 2010 contained the statement:

Seafolly denies these claims and says that they are completely false and without foundation and says the claims have been made maliciously to injure Seafolly.

The second, issued at various times between September 8 and 13, 2010, was sent to journalists from Pedestrian.TV, and Australian newspapers The Age and the Gold Coast Bulletin. It contained a similar statement that:

Seafolly denies these claims and says that they are completely false and without foundation. Seafolly says that these claims have been made maliciously to injure Seafolly and its business.

Parts of those press releases were then quoted in more publications, blogs and magazines (including trade publications) throughout Australia.

While at trial, Seafolly’s conduct was ruled not misleading or deceptive, both parties, following an appeal to the Full Court of the Federal Court of Australia, were eventually found to have engaged in misleading and deceptive conduct, contrary to the Australian Trade Practices Act 1974 (an Act since replaced by the Competition and Consumer Act 2010).

In respect of the two press releases, the Full Court held that Seafolly’s press releases represented that:

• Ms. Madden had knowingly made false claims that her competitor, Seafolly, has copied some of her swimwear, with the malicious intention of damaging Seafolly; and that
• Ms. Madden made false claims of copying by Seafolly which were recklessly indifferent to the truth of such allegations and did so with the malicious intent of damaging Seafolly.

This was misleading and/or deceptive, or likely to mislead or deceive. The Full Court found that Ms. Madden had truthfully believed what she published and that she had no such malicious intention.

Ms. Madden’s ability to claim for damages

Under the Trade Practices Act 1974, Ms. Madden, if she had suffered “loss or damage” as a result of Seafolly’s misleading and deceptive conduct, was entitled to:

…recover the amount of the loss or damage by action against the other person or against any person involved in the contravention.

A substantially similar provision is preserved in the new Competition and Consumer Act 2010.

Granting an award of AUD $40,000 to Ms. Madden, the Court considered the following considerations successfully pleaded by Ms. Madden:

• The serious nature of the allegation: the allegation made by Seafolly was a significant reflection on Ms. Madden’s character and conduct.
• The extent of its publication: There was considerable evidence that Seafolly’s press releases had been widely disseminated, and directed towards the fashion industry.

His Honour inferred those publishers were chosen by Seafolly “in the expectation that the releases would be quoted and widely disseminated to those with an interest in the industry. They formed part of a defensive strategy on the part of Seafolly which was designed to mitigate any harm done by the earlier publication of Ms. Madden’s allegations of copying.”

• The size and positioning of Seafolly in the marketplace: It was recognised throughout the litigation that “Seafolly was a well-established and reputable business in the fashion industry” – readers of the press releases would not expect a “reputable” organisation such as Seafolly to make such accusations “lightly.”
• The gravity of the impact of the allegation on Ms. Madden personally: Ms. Madden was entitled to be compensated for the hurt and offence caused by the misrepresentation; particularly, in her words, that she was portrayed as a “person who would deliberately and maliciously harm people.”

Commentary

While Ms. Madden was herself ordered to pay AUD $20,000 for her statement that Seafolly had “ripped off” her designs, she has now received considerable compensation for the damage to her own brand and business by Seafolly’s conduct.

It is common in public relations, particularly in creative fields, to present a hard-line response where there are allegations of trade mark, copyright or design infringement. However, many jurisdictions, including Australia, have strong consumer and competition laws that prevent companies from making misleading and deceptive statements.

Allegations of copying, counterfeiting and imitation are always a cause of alarm to designers and retailers; however, the award of a substantial sum of damages to Ms. Madden underscores the constant need to review and consider the appropriateness of a response. Once a release has gone viral, it is difficult to contain.

A wider principle at play is the ongoing need for fashion designers to protect their creative output. Registration under Australia’s relatively new and inexpensive Designs Act 2003 regime is a useful tool to assist in this protection. Effective strategies for brand protection have the potential to temper the cost and time involved in pursuing long-running intellectual property litigation both within the Australian jurisdiction and worldwide.

This case serves as an important reminder of the high potential costs to business of making misleading or deceptive statements about competitors, and the care that needs to be taken when communicating through all forms of media.

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This article was prepared by Louise Dumbrell (+61 3 8686 6067 and louise.dumbrell@nortonrosefulbright.com) of Norton Rose Fulbright’s Melbourne office and Luke Hawthorne (+61 2 9330 8736 and luke.hawthorne@nortonrosefulbright.com) of Norton Rose Fulbright’s Sydney office.

Sources
¹Seafolly Pty Ltd v Madden [2012] FCA 1346 (29 November 2012);
²Madden v Seafolly Pty Ltd [2014] FCAFC 30 (24 March 2014)
³Seafolly Pty Ltd v Madden (No 4) [2014] FCA 980 (12 September 2014)