Trade Marks and Parallel Importing

On 16 August 2018, Commonwealth Parliament passed the Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Act 2018 (“Amendment Act”). The Amendment Act received royal assent on 24 August 2018.

Key amendments passed in the Amendment Act (which came into force on 25 August 2018) address the ‘parallel importation’ defence under the Trade Marks Act 1995 (Cth) (“TMA”), specifically to clarify the circumstances where use of a third party’s registered trade mark by a parallel importer does not infringe the registered trade mark.

The regime before the Amendment Act

Trade mark infringement arises under s 120 of the TMA where a person “uses as a trade mark” a registered mark without authorisation of the owner. The TMA provides a number of defences to infringement, including under s 123, which provides a defence to infringement where a person uses a trade mark that was “applied by or with the consent of the registered owner”:

s 123 - Goods etc. to which registered trade mark has been applied by or with consent of registered owner

(1) In spite of section 120, a person who uses a registered trade mark in relation to goods that are similar to goods in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied to, or in relation to, the goods by, or with the consent of, the registered owner of the trade mark.

(2) In spite of section 120, a person who uses a registered trade mark in relation to services that are similar to services in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied in relation to the services by, or with the consent of, the registered owner of the trade mark.

[Notes omitted]

The s 123 defence is frequently associated with cases of parallel importation of goods, where the importer acquires genuine goods overseas (other than through “official” or “authorised” distribution channels) and then imports the goods for resale in Australia. Other potential instances of the defence have arisen in circumstances where a trader repairs or refurbishes trade marked goods and resells the refurbished goods still bearing the original trade mark.See, for example, Seiko Epson Corporation v Calidad Pty Ltd [2017] FCA 1403 at [361] – although the defence under s 123(1) is mentioned in the decision, reliance upon it was not considered necessary as the respondent was held not to have “used” the mark under s 120; Dunlop Aircraft Tyres Limited v The Goodyear Tire & Rubber Company [2018] FCA 1014 at [340] – the s 123(1) defence was raised in respect of the resale of refurbished imported aircraft tyres, but the defence was not considered as the Court rejected registration of the relevant trade marks.

In Scandinavian,Primary decision: Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2015] FCA 1086 (“Scandinavian (Primary Decision)”); Full Court: Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2016] FCAFC 91 (“Scandinavian (Full Court)”). the respondent (Trojan) was alleged to have infringed Scandinavian’s trade marks by importing Scandinavian’s cigars and repackaging them for resale in the Australian market. Trojan was not an ‘authorised’ reseller of Scandinavian’s products. It should be noted that the repackaging of the product was necessary to comply with Australian plain packaging tobacco laws. In doing so, Trojan discarded the original packaging and repackaged the goods with compliant packaging bearing Scandinavian’s trade marks.Scandinavian (Primary Decision) at [3], [17]-[18].

At both the primary decision and on appeal, the Court held that Trojan had used the marks for the purpose of s 120, but was entitled to rely upon the defence under s 123(1).Scandinavian (Primary Decision) at [7], [87]; Scandinavian (Full Court) at [77]. The defence applied even though Trojan had removed and replaced the original packaging, and it was enough that the goods were genuine goods to which the trade marks were applied with the consent of the trade mark owner.Scandinavian (Full Court) at [67].

The availability of the s 123 defence, and its interaction with the infringement provisions under s 120, has been the subject of lengthy judicial discourse. The language of s 123 also suggests that the question as to whether the mark was applied “by, or with the consent of, the registered owner of the trade mark” is a question of fact, and the outcome will therefore turn on the specific factual matrix of each case.Scandinavian (Full Court) at [53]. The Full Court in Scandinavian observed the question of fact as to whether the application of the mark was authorised (as required under s 123(1)) might be beyond the knowledge of the respondent:

… difficulty … may be faced by resellers who may have no sure way of knowing whether a mark applied to goods which they purchase was applied by or with the consent of the trade mark owner. This is, however, a difficulty that resellers have always faced when acquiring goods from anyone other than the registered owner of the mark. In the context of the 1995 Act, the reseller will either have the benefit of s 123 or will be left to rely upon any contractual or other remedies it may have against the person from whom it acquired the goods in the event these are found to be infringing.ibid.

The Amendment Act

The Amendment Act repeals s 123(1) and introduces a new s 122A, which applies to trade mark infringement proceedings commenced on or after 25 August 2018:See s 6 of the Amendment Act. It should be noted that s 123(2) defence in relation to trade marked services is not modified by the Amendment Act.

122A Exhaustion of a registered trade mark in relation to goods

(1) In spite of section 120, a person who uses a registered trade mark in relation to goods does not infringe the trade mark if:

(a) the goods are similar to goods in respect of which the trade mark is registered; and

(b) before the time of use, the person had made reasonable inquiries in relation to the trade mark; and

(c) at the time of use, a reasonable person, after making those inquiries, would have concluded that the trade mark had been applied to, or in relation to, the goods by, or with the consent of, a person (a relevant person) who was, at the time of the application or consent (as the case may be):

(i) the registered owner of the trade mark; or

(ii) an authorised user of the trade mark; or

(iii) a person permitted to use the trade mark by the registered owner; or

(iv) a person permitted to use the trade mark by an authorised user who has power to give such permission under paragraph 26(1)(f); or

(v) a person with significant influence over the use of the trade mark by the registered owner or an authorised user; or

(vi) an associated entity (within the meaning of the Corporations Act 2001) of a relevant person mentioned in subparagraph (i), (ii), (iii), (iv) or (v).

(2) A reference in paragraph (1)(c) to consent to the application of a trade mark to, or in relation to, goods includes, without limitation, a reference to:

(a) consent subject to a condition (for example, a condition that the goods are to be sold only in a foreign country); and

(b) consent that can be reasonably inferred from the conduct of a relevant person.

(3) In determining whether a relevant person mentioned in subparagraph (1)(c)(iii) or (iv) was permitted to use the trade mark, disregard how that permission arose, for example:

(a) whether it arose directly or indirectly; or

(b) whether it arose by way of proprietary interest, contract, arrangement, understanding, a combination of those things, or otherwise.

(4) In determining whether a relevant person mentioned in subparagraph (1)(c)(v) had significance influence over the use of a trade mark, disregard how that influence arose, for example:

(a) whether it arose directly or indirectly; or

(b) whether it arose by way of proprietary interest, contract, arrangement, understanding, a combination of those things, or otherwise.

The government’s stated intentions behind the amendments was to clarify the law and facilitate parallel importation into Australia by “limiting the strategic use of restrictions by registered trade mark owners”:Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Bill 2018, Explanatory Memorandum (“Explanatory Memorandum”), Sch 1, Pt 1 at [7].

The overall principle is that the registered owner’s rights are exhausted following the initial application of the trade mark to, or in relation to, goods. The subsequent use of the trade mark in relation to those goods by another person therefore does not infringe the trade mark rights of the registered owner in respect of those goods, as long as there is an appropriate relationship between the registered owner of the trade mark in Australia and the party who applied the mark. Where there is some commercial, corporate or contractual relationship of control or influence between the registered owner in Australia and the party that put the goods on the market, then the goods should be considered genuine parallel imports and should be able to benefit from the defence.ibid, at [11].

A significant change in the defence is the new section’s introduction of the element of reasonable inquiry on the part of the alleged infringer, as reflected in s 122A(1)(b) and (c), in place of the arguably strict and potentially problematic question of fact required under s 123(1).see Scandinavian (Full Court) at [53].

Under the new s 122A, the importer is now in a position where a defence is available provided it has made reasonable inquiries to ascertain that the trade mark in question was applied to the goods with the authority of the trade mark owner or a relevant person. Of course, what is “reasonable” must be determined with regard to the circumstances.

While the expanded defence will take some time to be judicially considered, and caution is still necessary, it appears the introduction of s 122A provides greater certainty for traders who engage in parallel importation and resale of trade marked goods. Trade mark holders, on the other hand, face a decreased ability to control the resale of genuine goods by ‘unauthorised’ distributors and resellers through parallel importation.

This article was originally published in the Queensland Law Society’s November 2018 edition of Proctor.