GOLD COAST company Local Directories has won a “David and Goliath” battle against Telstra following a decision handed down by the Federal Court.

The court has dismissed a claim by Telstra alleging that its Yellow Pages rival Local Directories had engaged in misleading and deceptive conduct by using the colour yellow for the covers of its telephone directories.

The case has been dragging on for seven years for Local Directories, which is headed by Daniel Stoten, a key figure in the Operation Wickenby tax evasion investigation conducted by the Australian Crime Commission and the Australian Taxation Office.

The trial brought by Telstra was heard early last year and the Federal Court has only just handed down its decision, dismissing Telstra’s case against Local Directories which produces and distributes phone directories in Queensland, NSW, Victoria and the Northern Territory.

"Local Directories has been vindicated by this decision and this decision protects the considerable investment made in our product,” says Stoten.

“We have always believed that our product offered advertisers and consumers with a genuine locally based alternative to Yellow Pages and that we had done nothing wrong in the way our directories were presented and promoted."

Stoten says the case has been costly to his company, which has been operating since 1994 and employs about 300 people nationally, 200 of them on the Gold Coast.

“You get used to competing against a company like Telstra,” Stoten tells Gold Coast Business News.

“Their idea of competing is rarely in the market place, but to bully you out of the market.

“We’ve been going for 20 years and this decision is a wonderful vindication. The judge embraces the cynicims of the litigation and he sees the real reasons why Telstra started litigating in 2006-07. That was because we expanded into NSW and wanted to bring some competition in the industry.”

Stoten says Local Directories, which has expanded into 35 regional markets, has spent “millions of dollars on this matter”.

“It’s been a drain on resources, but it has predominantly been an effect on the leadership of this company.”

The Federal Court decision means that Local Directories may continue to use yellow for the cover of its directories.

It found that yellow was the internationally recognised colour for business directories, as conceded by Telstra during evidence.

"This decision confirms that the law cannot be used to stymie legitimate competition in the market,” says Lisa Egan, an intellectual property lawyer at K&L Gates who acted for Local Directories.

This is the fifth action brought against Local Directories by Telstra and Egan says all have been successfully defended.

Telstra has distanced itself from the matter with a spokesman telling Gold Coast Business News that the matter is now being handled by its former Yellow Pages division Sensis.

“Sensis, not Telstra, is the recorded owner of these trade mark applications,” the spokesman says.

“The trade mark applications and the legal proceedings that have been mentioned in the media are under their control.  Telstra is not involved in the management of these disputes.”

Telstra owns 30 per cent of Sensis after selling the directories business for $450 million earlier this year to US-based Platinum Equity.

A Sensis spokesman could not be contacted for comment.

The news caps off a torrid few years for Stoten and his business partner Adam Hargraves.

In 2010, Stoten and Hargraves were convicted of evading $2 million in tax under the long-running Operation Wickenby investigation.

The charges related to Phone Directories Company, an entity of which both were directors and shareholders.

Telstra has been chasing Local Directories for almost eight years and first brought its allegations to the attention of the Gold Coast company in 2006.

Local Directories says Telstra had been aware of its activities for 13 years before making its complaint.

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