Exemplary or punitive damages are a powerful remedy. They are designed to punish the wrongdoer, act as a deterrent and discourage the victim from seeking revenge by taking the law into their own hands. They bear no necessary proportionality to the usual compensatory damages and, if awarded, the amount should ‘sting’ (Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 at  per Dyson JA).
At common law they are rarely awarded for torts such as negligence and the legislative trend has been to restrict their availability, particularly in relation to personal injury, wrongful death and defamation. Further, they are not available under the Trade Practices Act 1974 (Cth) and the general rule in Australia, the UK and most other British practice jurisdictions is that they are not available for breaches of contract.
The trend in intellectual property legislation, however, has been in the opposite direction. Such damages, usually referred to as ‘additional damages’, have long been available in Australia for infringement of copyright and circuits layout rights and they have recently been introduced for design and patent infringement. However, exemplary or punitive damages are not available for trade mark infringement in Australia. While such damages may be awarded for passing off a common law trade mark, such orders are rare in Australia (cf Crimson v Claudia Shoes Pty Ltd (No 7)  FMCA 109 where $30,000 was awarded). By contrast, in the USA § 1117 of the Lanham Act provides the court with a discretion to award treble damages where the amount of the recovery based on profits is inadequate.
But punitive damages for trade mark infringement may soon be available in Australia too. And without the upper limit that appears in § 1117 of the Lanham Act. IP Australia recently considered the penalty provisions in the Trade Marks Act 1995 (Cth). As part of that review it also considered the award of exemplary damages for trade mark infringement. An Options Paper has been published and IP Australia is supporting the option that an ‘additional damages’ provision like s 122(1A) of the Patents Act 1990 (Cth) be introduced into the Trade Marks Act. That section provides:
(1A) A court may include an additional amount in an assessment of damages for an infringement of a patent, if the court considers it appropriate to do so having regard to:
(a) the flagrancy of the infringement; and
(b) the need to deter similar infringements of patents; and
(c) the conduct of the party that infringed the patent that occurred:
(i) after the act constituting the infringement; or
(ii) after that party was informed that it had allegedly infringed the patent; and
(d) any benefit shown to have accrued to that party because of the infringement; and
(e) all other relevant matters.
In making the recommendation that a similar provision be inserted into the Trade Marks Act 1995, IP Australia concludes at p 26 of the Options Paper:
“IP Australia considers that this option should be adopted for the following reasons:
- the need to provide a punitive response to deliberate actions aimed at making it difficult to adequately determine actual levels of profits or damages;
- consistency with the patents, designs and copyright regimes;
- the potential for a greater deterrent effect on counterfeiters; and
- potentially greater motivation for trade mark owners to take civil action resulting in a reduced call on law enforcement for criminal action.
There has been some academic criticism internationally of the use of additional damages to the effect that punishment is the realm of criminal law. However, its use in the copyright and patents regimes has provided a useful and uncontroversial method of addressing unique problems in awarding damages for infringements of intellectual property rights in Australia. It would be expected that this would also be the case if additional damages were introduced in relation to trade mark infringement.”
IP Australia is calling for written comments on the Options Paper by 27 February 2009.