A recent case has opened up a limited means for registered trade
mark owners to prevent the parallel importation of products to
Australia. For importers, this creates uncertainty over whether or
not products can safely be parallel imported.
This article takes a general look at parallel imports in
Australia and considers what impact the court ruling may have on
Parallel importing is the importation of genuine products into a
country, without the permission of the incumbent authorised
distributor. In other words, parallel importing is when an importer
finds a cheaper price for a genuine product on the world market and
imports the goods for sale at a price that undercuts the existing
local prices set by the owner and local distributor.
Traditionally, government policy has supported parallel
importing, save for certain categories of protected products. In
theory, parallel importation increases competition and forces
prices down for consumers. Brand owners, manufacturers and
suppliers have typically resisted parallel imports because they
undermine existing distribution channels and result in products
tailored and priced for a specific overseas market being
distributed in a different region, where they may not meet local
regulations or consumer expectations.
Potential copyright or trade mark infringement
Over the years, intellectual property rights holders have
attempted to assert either copyright or trade mark infringement as
a means of preventing parallel imports. Most cases have been
decided in favour of the importer.
For example, generally speaking, the importer will not infringe
a registered trade mark if the trade mark applied to the parallel
imported product was done so with the consent of the owner of the
Australian registered trade mark (see section 123 Trade Marks
Act 1995 (Cth) (Trade Marks Act)).
The 'Montana Case' (Transport Tyre Sales Pty Ltd v
Montana Tyres Rims & Tubes Pty Ltd (1999) 93 FCR 421)
considered a situation where the parallel importer (Montana)
acquired tyres in Singapore and exported them to Australia. The
tyres were originally manufactured in Japan and the trade marks
were applied to them by the brand owner.
There was no question that the sale of the tyres in Australia
was 'use' of the trade mark. However, s123 of the Trade Marks Act
provides that 'a person who uses a registered trade mark in
relation to goods … does not infringe the trade mark if the trade
mark has been applied to… the goods by, or with the consent of, the
registered owner of the trade mark'.
Use of the trade mark 'in relation to' the goods was
found to extend to advertising of the goods.
There are currently some restrictions on parallel importing in
Australia, which can be found in the Copyright Act 1968
(Cth) (Copyright Act). These restrictions are
designed to protect local retailers, manufacturers and suppliers
who may otherwise face tougher competition from cheaper
For example, the parallel importation of books is not permitted
unless the book was first published overseas and then is not
published in Australia within 30 days of first publication. There
are a few other exceptions, but the general position is that
Australian publishers and authors are protected from being undercut
by cheap overseas imports.
There has been debate over whether parallel import restrictions
should be lifted completely in respect of books. Bodies such as the
International Publishers Association are against the lifting of
restrictions, believing a lack of protection for Australian authors
and publishers would be detrimental. However, the Australian
Government Productivity Commission recommended in their
'Copyright Restrictions on the Parallel Importation of Book
Research Report' (dated 14 July 2009) that parallel import
restrictions in the Copyright Act be repealed, giving three years'
notice to facilitate industry adjustment. However, this
recommendation was rejected by the government on 11 November 2009
for the stated reason that removing the restrictions would
adversely affect Australian authors, publishers and culture.
The recent decision of Sporte Leisure Pty Ltd v Paul's
International Pty Ltd (No 3)  FCA 1162 (29 October 2010)
introduces an element of doubt for importers who might otherwise
believe they are protected by the s123 defence to trade mark
infringement discussed above. In other words, ordinarily an
importer would expect that genuine parallel imported goods have had
the trade mark applied to them with the consent of the owner.
An Indian Company, BTB Marketing PVT Ltd (BTB),
had a licensing agreement with Greg Norman Collection Inc
(GNC). Under the licensing agreement, BTB was only
able to apply the GNC trade marks to garments sold by it in India.
A Pakistani Company, Sunsports (BVI) Limited
(Sunsports) sought to acquire products from BTB
for supply outside of the Pakistani market; however, BTB did not
know that Sunsports planned to sell the goods outside that market.
The goods eventually ended up in the hands of Paul's International
Pty Ltd (Paul's International) in Australia.
Did GNC consent to the use of its trade mark on products
manufactured for BTB for sale to Sunsport? The court found:
'[w]here a registered owner
consents to another person applying the registered mark to goods on
condition that the goods must not to be supplied outside a
designated territory, the registered owner would
not [emphasis added] usually be regarded
as having consented to the application of the mark to goods which
the other person knows at the time he or she applies the mark are
to be supplied by him or her outside the territory'.
It was found that GNC had not consented to use of the trade mark
on goods that were to be supplied outside of the defined territory;
hence Paul's International could not rely on the defence provided
by s123 of the Trade Marks Act.
Consequently, Paul's International had breached the Trade Marks
Act; section 120 provides that a person infringes a registered
trade mark if the person uses as a trade mark a sign that is
substantially identical with, or deceptively similar to, the trade
mark in relation to goods or services in respect of which the trade
mark is registered.
This recent decision is consistent with the position that a
brand owner has consented to the use of its trade mark once it has
licensed another party to manufacture products bearing the mark.
However, the case looks more closely into what is meant by
'consent'. Frequently, the courts have favoured the importer and
held that any manufacture, anywhere in the world of genuine goods
under licence, has been done with consent. In the above case, it
would seem that Paul's International was the last party to obtain
the goods in a chain of events that lead to their arrival in
Australia. However, express restrictions placed by the brand owner
on its licensees meant that it had not in fact consented to the use
of its trade mark for the Australian market.
An onus lies on importers to make relevant inquiries about the
conditions of supply of their goods before importation.
Current position in Australia
The current position in Australia is that importers may be
liable for trade mark infringement if they import goods where the
brand owner's consent to the use of its trade mark on the goods is
expressly for specific territories.
If the decision discussed above is to be followed by the courts,
the onus will be on parallel importers to be aware of any
territorial restrictions that could apply to goods they are
importing. Importers should proceed with caution when importing
goods for trade in Australia.
Importers should also review the warranties they obtain from
overseas suppliers so as to transfer some of the burden onto the
supplier to ensure that the brand owner's consent to the use of its
trade mark is not 'conditional'.
First published in Inside Retailing Magazine.
Authored by David Moore and Lauren Bartlett, Cornwall