In a major win for Australian brand owners, the Full Court of the Federal Court of Australia has held that the Paul’s Warehouse discount retail chain infringed the trade marks of Lonsdale Australia Limited when it imported into Australia “Lonsdale” branded goods that were not licensed for the Australian market.1

Cameron Harvey and Andrew McRobert of Norton Rose Australia ran the proceeding for Lonsdale Australia.

The Proceeding

The proceeding was issued on 15 May 2012 and Lonsdale Australia successfully obtained an interlocutory injunction the following week. A week after that, the trial was held. Four days after the trial, Gordon J delivered her judgment and found in favour of Lonsdale Australia.

An expedited appeal was heard by the Full Court (Keane CJ, Yates and Jagot JJ) on 28 August 2012. The judgment of the Full Court was handed down this morning, two weeks after the hearing of the appeal. The Full Court held unanimously in favour of Lonsdale Australia.

The Facts

The “Lonsdale” branded clothing and footwear in this case had been manufactured at the direction of the German licensee of Lonsdale Sports Limited (Lonsdale Sports). Lonsdale Australia and Lonsdale Sports are both UK-based companies.

The respondents in the case were PW Inventory Pty Ltd and Paul’s Retail Pty Ltd (Paul’s Retail). Paul’s Retail operates (as trustee) the “Paul’s Warehouse” chain of stores in Australia (Paul’s Warehouse Group).

The licence granted to the German licensee of Lonsdale Sports was to promote, distribute and sell goods marked with particular “Lonsdale” trade marks within a range of European countries. In August 2011, the German licensee entered into an agreement with a Cyprus-registered company named Unicell Ltd. Pursuant to that agreement the German licensee sold almost 300,000 units of Lonsdale goods to Unicell Ltd. The Paul’s Warehouse Group acquired all of them (Paul’s Goods) through a US-based intermediary named TMS LLC.

Although Unicell is registered in Cyprus, title in the Paul’s Goods passed from the German licensee to Unicell Ltd in the Peoples Republic of China (PRC). The Paul’s Goods never entered Europe. They were shipped from the PRC to Colombo, Sri Lanka and then processed and reloaded in Sri Lanka before being shipped to Sydney, Australia through Singapore. Over 100,000 units of the Paul’s Goods were seized by the Australian Customs and Border Protection Service under trade mark notifications that had been lodged by Lonsdale Australia.

The Decision

The key issue in the case was whether the Australian registered trade marks had been applied to the Paul’s Goods with the consent of the registered owner of those marks.

The Full Court upheld Lonsdale Australia’s argument that the Paul’s Goods had been sold in the PRC, being outside the territory of the German licensee of Lonsdale Sports. The Full Court held that to interpret the relevant licence agreement in the contrary manner contended for by the Paul’s Warehouse Group would be to deny the “evident intention of the [contracting] parties that the authorised supply of goods bearing the mark[s] should be confined to the defined geographic area”. Because Lonsdale Sports had not given its consent there could be no consent by the owner of the Australian trade marks, Lonsdale Australia”.

The Paul’s Warehouse Group had also argued that it could not have infringed the Australian trade marks of Lonsdale Australia because it did not "use” those marks when it imported the Paul’s Goods into Australia. The Full Court dismissed that argument. It held that an importer does use a trade mark when importing branded goods for the purpose of sale in Australia.

Ultimately, whether the owner of Australian registered trade marks has consented to the application of those marks to goods made overseas will depend on the facts of the particular case. However, the result in this case provides a powerful additional weapon to trade mark owners in combating direct imports.