Parallel importation occurs when someone imports goods which are genuine but which were intended to be sold in a market other than Australia.

The Government and consumer groups tend to favour parallel importation as it gives consumers the potential to access goods which may be cheaper or otherwise not available in Australia. The Federal Government is currently pushing ahead with its controversial proposal to allow  the importation of new cars outside established frameworks, in order to provide Australian consumers with access to vehicles at the lowest possible cost. Of course the fact that the parallel imported goods are cheaper than the locally licensed goods tends to incense authorised local distributors. What can be done?

Unfortunately for the local distributor, options under current intellectual property laws are limited. Under the Copyright Act there is a specific defence to infringement for parallel imported copyright material accompanying goods (like a label, logo, instructions manual etc.). Under s 123 of the Trade Marks Act it is not an infringement of a trade mark registration if the trade mark was applied with the consent of the trade mark owner (which, if they are genuine goods, will normally be the case). But, in the law, as in life, there is often more than one way to skin a cat.

Consent

There may be questions of whether the trade mark owner actually consented to application of the trade mark. A number of recent cases have considered the issue of consent under section 123, with the bottom line being that even if the products are genuine, it is no certainty that the section 123 defence will apply.

For example, it may be that the brand owner’s consent to the use of its trade mark is conditional on the products only being sold and distributed in a particular jurisdiction. In Sporte Leisure Pty Ltd v Pauls Warehouse International Pty Ltd (No. 3) [2010] FCA 1162, the trade mark owner authorised an overseas company to manufacture clothes with Greg Norman Collections Inc trade marks for distribution and sale in India only.

The goods in question were ultimately  imported into Australia by Paul’s International. The court found that whilst the goods imported into and sold in Australia were manufactured by a licensee of the Australian trade mark owner, they were manufactured in breach of its licence because it was known that they were to be  sold to a customer outside of India. As the trade mark owner had not consented to the use of the trade mark on the garments outside of the defined region, the court held that the s 123 defence did not apply.

Another potential avenue open to brand owners is where the consent of the Australian trade mark owner cannot be linked back to the actual goods at the time of manufacture. In Paul’s Retail Pty Ltd v Lonsdale Australia [2012] FCAFC 130, Lonsdale Sports was the owner of the Lonsdale trade mark for clothing. Lonsdale Sports licensed its trade mark to Punch in 2009 to market, distribute and sell products bearing the Lonsdale mark in Europe, and to manufacture the products in or outside Europe. Punch subsequently entered into an agreement with Unicell Limited to sell products with the Lonsdale marks direct from the warehouse in China. In 2011, Unicell sold goods bearing the Lonsdale mark to an American company who on sold the goods to Paul’s Warehouse in Australia.

The court held that Paul’s Warehouse was not entitled to rely on the s 123 defence. This was on the basis that Punch was not related to Lonsdale Australia (the Australian trade mark owner), that Lonsdale Australia was not involved in the European licence or in Punch’s application of the trade marks to the goods, and that the sale to Unicell was outside its licence agreement with Lonsdale Sports.

These decisions highlight that importers may  be liable for trade mark infringement if they import goods where the Australian brand owner’s consent is conditional or cannot be traced back to the actual goods in question.  The issues will depend on the particular facts of any case, but should be thoroughly explored by those with interests in parallel importation.

Australian Regulations

In addition to the issue of consent, some parallel imported goods need to comply with Australian regulations. In Electrolux Home Products Pty Ltd v Delap lmpex KFT [2015] FCA 62, Australian consumers were being offered electrical equipment under the trade marks AEG and ELECTROLUX via a Hungarian website. The plaintiff succeeded in gaining an injunction to prevent sale of the goods on the basis that such sales were in breach of the Australian Consumer Law (ACL) because the imported goods did not comply with Australian safety standards.

There was also a concern that the goods did not comply with the consumer warranty provisions of the ACL. Unique to Australia is a certain form of words that must accompany all express warranties against defects for goods supplied to consumers. An injunction on this basis would only prevent imports until the warranty information was corrected, but it would serve to disrupt supply for a while.

Disadvantages of parallel imports

Finally, brand owners should consider the issues likely to be faced by consumers who purchase parallel imports.

Consumers may sometimes be disadvantaged when purchasing parallel imports, especially where there are problems with these products. Local warranties may not apply and warranty claims and repair times may be problematic. For larger and more expensive items, there may be significant impacts on whole of life costs, an issue strongly stressed by automotive industry groups in their lobbying against the Government’s proposal to allow parallel importation of new vehicles. Indeed, the Australian Competition and Consumer Commission’s view of parallel imports recognises that although there are potential access or cost benefits, consumers may sometimes be disadvantaged when purchasing parallel imports as opposed to purchasing the same products from an Australian authorised supplier.

Dealing with parallel importation can be challenging for rights owners, but as these decisions show there may be avenues worth exploring.

You can find out more at www.accc.gov.au