The price of goods sold in Australia compared to that in the rest of the world has become a significant political and consumer issue. A recent court decision has restricted the circumstances under which the parallel import of authentic goods into Australia is allowed, much to the delight of authorised distributors yet to the disappointment of consumers seeking a more competitive market.

What is Parallel Importing?

Parallel importing occurs when a trade mark is legitimately applied to authentic goods overseas, by or with the consent of the trade mark owner, and those goods are then imported into Australia without the consent of the Australian registered owner of that same mark.

The Australian registered trade mark owner or authorised distributor often finds the parallel importation of legitimate goods objectionable as they are sold in competition with goods specifically designated for sale in Australia, often at a lower price. Moreover, parallel imports often exploit the goodwill of the Australian registered owner or authorised distributor.

In Australia, the parallel importation of authentic goods has been allowed if the importer could satisfy a statutory defence that the trade mark was applied to the goods by, or with the consent of, the Australian trade mark owner.

Reigning in the legitimacy of parallel imports

A recent appeal decision involving Paul’s Retail Pty Ltd (trading as Paul’s Warehouse) and Lonsdale Australia Limited (the Australian registered owner of the Lonsdale sportswear trade marks) defined and further clarified the circumstances where parallel importation is allowablei.

The case stemmed from a licence granted to Punch GmbH (Punch) by Lonsdale Sports Limited (Lonsdale UK) which permitted Punch to use various Lonsdale trade marks in Europe, as well as to manufacture goods and apply the Lonsdale marks to those goods in China. Punch was not licensed to use the trade marks in Australia.

Nearly 300,000 items of goods manufactured under Punch’s licence in China were later imported into Australia where they were offered for sale at Paul’s Warehouse. Paul’s Warehouse stood accused of trade mark infringement because of this activity.

In the initial judgment, the lower court found that Paul’s Warehouse infringed Lonsdale’s trade mark because it was not the Australian registered trade 

mark owner (Lonsdale Australia Limited) that had applied, or consented to the application of the Lonsdale trade marks in China. Rather, if there was any consent, the consent was by Lonsdale UK. This meant that Paul’s Warehouse could not rely on the statutory defence to infringement.

The appeal court agreed that Paul’s Warehouse infringed the trade mark, but applied different reasoning. It instead looked into the terms of the licence between Lonsdale UK and Punch. Punch applied the Lonsdale marks under a licence to manufacture. Lonsdale UK contractually limited Punch’s use of the trade marks to Europe. Consequently, under the licence, Punch could not ‘consent’ to the application of the marks in relation to goods sold in Australia, so the statutory defence was not triggered. The appeal court accordingly did not need to consider whether Lonsdale Australia (the actual trade mark owner in Australia) was the party that gave consent.

Parallel importers now have heavier obligations than before

The decision restricts the scope of legal parallel importation. Going forward, importers must:

  • verify the authenticity of goods coming into Australia to ensure the goods are not counterfeit as they did before, but also
  • check conditions imposed by the trade mark owner/licensor upon the entity from which the goods are received.

Additional warranties should be considered in agreements with those off shore suppliers to ensure the importers are not unwittingly caught in the Paul’s Warehouse situation.

Similarly, it would be wise for owners/ manufacturers seeking to maximise their income from the sale of licensed goods, to ensure that licences granted are watertight in narrowing the geographic scope of rights afforded to their licensees.