Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd  [2015] FCA 1086  (9 October 2015)

Trade marks – parallel importation – unpacking and repackaging due to tobacco labelling laws – whether infringing use by retailer importer – availability of section 123 defence

The applicants (collectively, STG) manufacture and sell cigars under various marks, including CAFÉ CRÈME, HENRI WINTERMANS and LA PAZ. In competition with STG’s authorised Australian distributor (STG Australia), Trojan imports genuine STG cigars, manufactured by STG (but sourced from a destination not subject of evidence in the proceeding). Due to Australia’s plain packaging laws for tobacco products, however, Trojan must unpack STG’s cigars upon their arrival in Australia and repackage them in compliant packaging. Trojan’s packaging, among other things, includes the relevant marks on the prescribed area and portion of the packaging. In contrast, cigars sold by STG Australian are pre-packaged by STG overseas in a manner that already conforms with Australian law. Trojan’s packaging and that used by STG Australia were not an exact match.

Trojan raised a threshold question as to whether section 26 of the Act precluded an authorised user (i.e. STG Australia) from suing alongside the registered owner of the marks in suit. Section 26 provides a mechanism for an authorised user to sue for infringement if the registered proprietor consents, or fails to bring an action within a proscribed period. This issue proved something of a smokescreen.  However, Chief Justice Allsop declined to read into the section a proviso to the effect that an authorised user may sue “as long as the registered owner does not”.

It was not in dispute that the inclusion of the marks in suit on Trojan’s packaging was “use as a trade mark” for the purpose of section 120 of the Act. Trojan argued, however, that that “use” was by STG, not Trojan, because Trojan applied the marks only to indicate a trade connection between the goods and STG. That argument, in effect, reignited the pre-1995 debate concerning parallel importation. His Honour reviewed the authorities concerning the doctrine of exhaustion of rights and whether a registered owner’s exclusive rights extend beyond the point of initial sale, particularly as against a retailer importer. Ultimately, although his Honour thought it “counterintuitive”, and concluded that he was bound by a band of Full Court authorities to the effect that “absent s 123 being engaged, the mere sale of goods already marked by the registered owner (a fortiori if a mark is applied by someone other than the registered owner) would be an infringing use of the mark by the importer”.

Trojan also relied upon section 123 of the Act, which provides that use of a registered trade mark “in relation to” similar goods to those in respect of a 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”. It was not in dispute that section 123 would apply to an importer referring to the marks for the purpose of advertising and invoicing genuine products, and selling the actual products themselves; the owner’s consent is implied in those contexts. But what of Trojan’s new packaging? In that regard, the burning issue was whether the registered owner’s “consent” is to be assessed at the time of manufacture (Trojan’s argument), or when Trojan repackaged and arguably “re-applied” the marks in suit to otherwise genuine goods (STG’s position).

STG’s claim ran out of puff at this point, because section 123 was held to apply. STG sought to emphasise that Trojan’s argument would place outside of a trade mark owner’s control the “secondary get up and packaging so important to modern commerce”. Trojan argued that that submission impermissibly introduced questions of goodwill into a provision designed to protect ancillary uses of a mark in relation to genuine goods. His Honour preferred Trojan’s submission, and favoured an analysis of the words “has been applied” that looks to consent as at the time of original packaging. His Honour also held that that interpretation was consistent with the role of section 123 in “protecting as non-infringing use that which does no more than draw a connection between the goods and the registered owner”.

With respect, the authors have some sympathy for the applicants’ predicament. A parallel importer who modifies a registered mark for the purposes of advertising and repackaging is unlikely to be able to rely upon section 123, because the protection applies only to the actual registered mark and not variations to it.

But what of an importer who reproduces a mark faithfully, but uses sub-standard or defective packaging? Such conduct may affect the goodwill of the mark and/or the registered owner.

In the present case, however, the Court may well have been influenced by the somewhat unique circumstances of the repackaging; absent Australia’s tobacco labelling laws, Trojan simply would have sold the genuine products in their original packaging.