On 11 September 2012, the Full Court of Australia handed down its decision in the case of Paul's Retail Pty Ltd v Lonsdale Australia Limited, on appeal from the decision made by the primary judge (Gordon J) in the case of Lonsdale Australia Limited v Paul's Retail Pty Ltd.

The Full Court’s decision marks a significant change in direction in favour of trade mark proprietors and against parallel importation. In essence, it now appears that where a trade mark is applied by a licensee under a licence to manufacture, if the licensed manufacturer is (by contract) limited to a particular territory, then the parallel imported product from that territory into Australia will infringe registered trade mark rights in Australia.

It also appears that the onus of establishing that a mark as been applied with the “consent” of the trade mark owner is now effectively on the parallel importer, and that if the facts are sufficiently "clouded", the parallel importation may be otherwise prevented.

The Facts

Lonsdale Australia became the registered owner in Australia of several trade marks, having acquired them from Lonsdale Sports Limited (a related company having the same ultimate holding company). Lonsdale Australia had licensed its rights to those marks to another entity, which for a period supplied “Lonsdale” marked products to Paul’s Warehouse.

Separately (in Europe), Lonsdale Sports Limited licensed the rights to use its marks (separate from the Australian registered marks) to Punch GmbH, which manufactured products and affixed certain holographic labels to them that bore the “Lonsdale” marks.

Some time after the supply from Lonsdale Australia to Paul’s Warehouse was discontinued, Paul’s Warehouse ordered, from a US company, “Lonsdale” marked products with the holographic labels (i.e. the European products), which products also featured the Australian registered marks. There was no evidence however that Lonsdale Australia had any intention of retailing in Australia those uniquely marked holographic products.

Londsale Australia objected to Paul’s Warehouse’s importation and promotion of the European products, and asserted that importation and promotion of those products constituted a use that infringed its rights under the Trade Marks Act. Paul’s Warehouse pointed to the licence between the European licensee and Lonsdale Sports Limited to assert that there was no infringement, as there was a legitimate application of the marks to the products by the entity that was entitled to so apply the mark (the Champagne Heidsieck principle).

The First Instance Decision

Justice Gordon, in the first instance decision, rejected Paul’s Warehouse’s assertion and held that at least the Australian registered trade marks had not been applied with the consent of the Australian registered owner of those trade marks, and so the use of those marks was not legitimate. The case was found to be different to that of Transport Tyres v Montana Tyres where section 123 of the Trade Marks Act allows a parallel importer a defence to infringement if the relevant trade mark had been applied to the goods by, or with the consent, of the registered trade mark owner i.e. where an importer could trace the chain of supply of the goods from the retailer back to the registered owner of the trade marks. In this case, the act of Punch in affixing the holographic mark to the products was not consented to by Lonsdale Australia. There were separate supply chains of separate entities for separately registered marks, even though the ultimate products were similar.

Importantly Justice Gordon acknowledged that the alleged infringer bore the onus of establishing consent under section 123. Her Honour also stated that the law so far had acknowledged that consent may be established by “[proof of a] chain of title or supply chain, [proof that the parties are] related entities in the same corporate group or other conduct”. In this case there was "separate ownership of the marks in Australia and Europe and separate manufacture (under licence) of the goods to which the relevant registered marks in each jurisdiction are applied". As to "other conduct" that may establish consent, this would depend upon case by case development of the law, and her Honour was of the view that there was no evidence to show that Lonsdale Australia had expressly or impliedly consented to the application of its Australian registered trade marks to the relevant goods imported by Paul’s Warehouse.

The Appeal

Paul’s Warehouse appealed the decision of Justice Gordon to the Full Federal Court (3 judges) and sought a reversal of the decision that the marks had been applied without the consent of Lonsdale Australia, particularly taking into account the relationship between Lonsdale Australia and Lonsdale Sports Limited. Although the Full Court identified the relevant issues as concerning the construction of section 123 of the Act, it did not find the need to reach a conclusion in that regard.

The Full Court found on the facts before it that even assuming that Lonsdale Sports Limited’s consent to Punch’s licensed manufacture and sale of the relevant products amounted to consent by Lonsdale Australia, that consent was limited in its terms to “the non exclusive right to promote, distribute and sell Products bearing the Trade Marks in the Territory” (emphasis added), and therefore, section 123 did not afford Paul’s Warehouse a defence against a section 120 claim for infringement. The Full Court held that the question of whether a mark had been applied with the consent of the owner is factual and is to be resolved on the facts of the particular case.

In dealing with Paul’s Warehouse’s argument that the importation and sale of goods marked with the consent of the registered trade mark owner (or its licensee) does not amount to “use” of a trade mark by the importer, the Full Court affirmed its established view that absent evidence of “consent” as required under section 123, even the mere sale by an importer of goods already bearing the same trade marks as have been registered in Australia infringes the relevant registration.

The Full Court affirmed that the decision of Justice Gordon in the first instance was correct (and did not disturb Her Honour’s finding as to onus), and held that the appeal should be dismissed.

It remains to be seen whether Paul’s Warehouse will seek Special Leave to appeal the decision to the High Court.