Kmart denies CEO misled streetwear co. over cargo pants
Intellectual Property June 28, 2018 8:00 pm By Christine Caulfield | Melbourne

Kmart has filed its defence denying claims in a suit alleging CEO Guy Russo gave false assurances that the department store had revamped a line of cargo pants and shorts that infringed the copyright of Australian streetwear manufacturer Globe International.

In a document filed in the Federal Court on Wednesday by Kmart’s lawyers from Allens, the company admitted that Russo told Globe’s boss that the new line of clothing contained “fresh designs” and a broad scope of changes from earlier pants and shorts, but denies the statements were false or misleading.

Kmart said it knew it didn’t have a licence from Globe to import the slim-fit pants and shorts into Australia for sale, but said it did not require a licence and was not infringing on the company’s copyright. The retailer also filed a separate cross claim on Wednesday. A company spokesperson did not immediately respond to a request for comment Thursday.

Globe was founded in Melbourne, Australia by three brothers – Stephen, Peter and Matt Hill — inspired by Melbourne’s underworld skateboard scene. The ASX-listed company sued Kmart on May 25, alleging that since 2014, Kmart has been importing for sale cargo pants and shorts that resemble the copyright-protected designs of Globe’s workwear brand, FXD.

In addition to claims of copyright infringement, the suit alleges the retailer breached the consumer law when Russo told Globe CEO Matt Hill that the company had significantly modified the design for its slim-fit cargo pants and shorts after being warned that the clothing was infringing on Globe’s copyright.

According to the suit, Matt Hill sent a letter warning of alleged copyright infringement to Russo on October 27, 2017 and received a letter in return from Andre Reich, Kmart general manager for appeal, beauty and footwear on November 11.

On December 18, Globe took its complaint higher up the corporate chain, writing to Westfarmers chairman Bob Avery.

About a month later, a letter was sent by Russo to Hill. Russo sent another letter to Hill on December 17, 2015, in which he told Hill that Kmart had been selling newly designed versions of the cargo pants and shorts since March 2015.

Globe claimed the new design continued to substantially reproduce Globe’s design and said it would have taken action to protect its intellectual property sooner if not for Russo’s alleged misrepresentations.

“Acting in reliance upon the Russo representations, Globe refrained from taking further steps against Kmart to restrain Kmart from infringing copyright in the works,” Globe said.

Globe claimed Kmart knowingly engaged in copyright infringement and that it refused to comply with its demands.

The company said it had suffered loss and damage as a result of the alleged design copying, including lost sales of FXD garments, and that the reputation and goodwill of FXD has taken a blow as a result of Kmart’s actions.

“The integrity, exclusivity and popularity of the applicants’ brand have been earned due to innovative and exclusive designs, and the quality of materials and method of manufacture,” Globe said.

Globe claimed Kmart’s conduct was “deliberate, wilful and in flagrant and knowing breach of [Globe’s] rights”.

Globe is represented by K&L Gates. Kmart is represented by Allens.

The case is Globe International Limited v Kmart Australia Limited.

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Christine Caulfield

Christine Caulfield has been a journalist for 18 years. She was most recently the Co-Managing Editor at US legal news publication Law360. Prior to that she worked as the County Court reporter for The Herald Sun. She is Co-Founder and Editor of Lawyerly.