Importation of parallel goods (also known as grey market goods) made easier by the recent legislative amendment is great news for parallel importers but leaves Australian trade mark owners, local distributors and licensees, and even some consumers, looking more grey.
For those unfamiliar with parallel importation, it is the importation of genuine goods without the consent of the Australian registered trademark owner. It can be profitable since equivalent products can be purchased at a cheaper price in another country and sold at a higher price in Australia. Arguably, parallel importation can facilitate competition within the Australian market and subsequently allow Australian consumers to purchase the same goods at a lower price. On the other hand, the increased competition adversely impacts the sales and business of authorised local distributors and licensees. Furthermore, although the imported goods are genuine goods, their quality or features may differ from those sold in Australia as they are intended for a foreign market and as a result may cause confusion or dissatisfaction to Australian consumers.
Notwithstanding its dichotomy of impacts, the recent 2018 legislative amendment encourages parallel importation by widening the defence for infringement of trademarks. This amended provision applies to all actions initiated on or after 25th of August 2018 regardless of whether the alleged infringement occurred prior to that date. Previously, there was a provision in the Trade Marks Act (s 123), which stipulated that it was not an infringement of a trade mark if the trade mark had been applied to the goods by or with the consent of the registered owner of the Australian trade mark registration. The now-repealed provision intended to allow for parallel importation but was in practice significantly constricted by the court’s narrow interpretation of ‘consent’ in the relevant section. Paul’s Retail Pty Ltd v Lonsdale Australia Ltd [2012] FCAFC 130, which was decided in favour of the trade mark proprietors despite the defendants’ reliance on the s 123 defence, is a clear example of this.
Paul’s Retail v Lonsdale involved a dispute between Lonsdale Australia (registered owner of the trade mark in Australia) and Paul’s Warehouse (an Australian company) whereby Lonsdale Australia objected to Paul’s Warehouse importing “Lonsdale” marked goods manufactured by a European licensee of the trademark on the basis that it was a trademark infringement. Both Lonsdale Australia (authorised registered trademark owner) and the European manufacturer (licensee) had consent of Lonsdale Sports Ltd (an English entity) to use the trademark and they were therefore arguably related companies under common control and ownership. This relationship was the basis upon which Paul’s Warehouse made the s 123 defence. However, the Full Court found that this was irrelevant and what was important was the characteristic feature of the terms of the European manufacturer’s licence. The licence granted an authority to supply Lonsdale marked goods in the defined geographic area only and an agreement for sale involving delivery outside the territory could not be inferred from the contract. As such, the case was decided in favour of the trademark proprietors and the parallel importation and sale were a trademark infringement.
Would this case be decided differently today? Although the provision is yet to be tested in court, it is likely that the case would be more favourable for Paul’s Warehouse. The new s 122A of the Trade Marks Act indeed clarifies and expands the scope of consent as it requires consent of a “relevant person” rather than just the registered owner of the trademark, which was necessary under the old s 123 defence. S 122A(1)(c) defines a “relevant person” to include:
- The registered owner of the trade mark
- The authorised user of the trade mark
- A person permitted to use the trade mark by the registered owner
- A person permitted to use the trade mark by an authorised user who has power to give such permission
- A person with significant influence over the use of the trade mark by the registered owner or an authorised user
- An associated entity (within the meaning of the Corporations Act 2001) of a relevant person mentioned above
Therefore consent would now include one from a group company subsidiary, distributor or licensee. S 122A(2) further stipulates that “consent” for the purposes of the provision refers to consent subject to a condition such as that the goods are to be sold only in a foreign country. Parliament expresses in the Explanatory Memorandum that this section is intended to cover circumstances such as those in Paul’s Warehouse v Lonsdale to ensure that the registered trademark owners cannot circumvent the defence by imposing specific restrictions on licensees. If such limitations exist in the licence, the registered owner should seek a remedy from their licensee when such specification is breached, not from a parallel importer.
In addition, the legislation further tilts in favour of parallel importers as s 122A provides that making reasonable inquiries in relation to the trade mark before the time of use and concluding that the trade mark has been applied to the goods by or with the consent of a relevant person is sufficient and it is not necessary that the trade mark has in fact been applied. For instance, requesting and receiving a certificate of authenticity from a supplier would generally satisfy the requirement. This significantly reduces the evidentiary burden on the parallel importer in relying on the defence.
This new legislation is clearly a propitious scheme for the parallel importers endorsing the Australian government’s policy favouring parallel imports to strengthen competition. However, given that parallel importation is a double-edged sword, without addressing the possible detrimental impacts on the consumers and local distributors and licensees identified earlier, the law on parallel importation is and will continue to remain contentious.
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Disclaimer: The contents of this publication are general in nature and do not constitute legal advice. The information may have been obtained from external sources and we do not guarantee the accuracy or currency of the information at the date of publication or in the future. Please obtain legal advice specific to your circumstances before taking any action on matters discussed in this publication.
