The Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Act 2018 (Cth) (Act) was assented to on 24 August 2018. Among other changes, it amends the Copyright Act 1968 (Cth) (Copyright Act) and the Trade Marks Act 1995 (Cth) (Trade Marks Act) to clarify the circumstances in which the parallel importation of trade marked goods does not infringe a registered trade mark.

A parallel importer will not infringe the trade mark rights of the registered owner, if:

  1. the goods being imported are similar to the goods covered by the trade mark; and
  2. it has made inquiries relating to the trade mark before using it and, after such inquiries, a reasonable person would conclude that the trade mark had been applied with the consent of a relevant person.

The amendments arise in response to the Productivity Commission’s Inquiry Report on Intellectual Property Arrangements to better facilitate parallel importation into Australia. The Government believes this will increase competition and so be of benefit to consumers.

What has changed?

The Act inserts a new section 122A into the Trade Marks Act (and repeals section 123(1)), which sets out the criteria that must be met for a person’s activities to be taken as not infringing the trade mark.

The overall principle introduced by the amendment is that the registered owner’s rights are exhausted following the initial application of the trade mark to, or in relation to the goods. The subsequent use of the trade mark in relation to those goods by another person does not infringe the rights of the registered owner, if there is an appropriate relationship between the registered owner of the trade mark in Australia and the party that applied the mark.

The following conditions apply:

i. Similar goods - The goods must be similar to the goods covered by the Australian trade mark.

ii. Reasonable inquiries - The person has made reasonable inquiries in relation to the trade marked goods before use. This is intended to ensure that the person takes appropriate steps to ensure the mark was applied by or with the consent of the relevant person. The nature of this inquiry will depend on what the hypothetical objective reasonable person would do in these circumstances. Generally requesting and receiving a certificate of authenticity from the supplier would be sufficient.

The extent of the inquiries will depend on the facts of the situation. More substantive inquiries may be required where a supplier is known or suspected to supply counterfeit goods or where the goods are being offered at suspiciously low prices. Less extensive inquires may be expected when purchasing from a known licensed distributor of the relevant goods.

iii. Trade mark applied with consent of relevant person - The relevant person can be a registered owner or authorised user of the trade mark, a person who is permitted to use (or has significant influence over the use of) the trade mark by the registered owner or authorised user, or an associated entity (within the meaning of the Corporations Act 2001 (Cth)) of any of these people.

The reference to associated entities is intended to capture the situation where the trade mark was applied to the goods in a foreign country by one member of a corporate group structure; however, the owner of the trade mark in Australia is a different member of the same corporate group. The amendments clearly do not affect counterfeit goods being imported into Australia.

The legislation, by requiring the consent of a relevant person “at the time of the application” provides protection for parallel importers against the previous practice of trade mark owners assigning their Australian trade marks to an Australian distributor to stop parallel imports.

Evidentiary burden

A parallel importer who uses a trade mark in line with the requirements outlined above, does not bear the burden of proving that the registered owner applied the trade mark to the goods or consented to the application of the trade mark by another party.

Consent

Consent is in the context of this section includes consent subject to a condition (e.g. that the goods can only be sold in a particular country) and consent that can be reasonably inferred from the conduct of a relevant person.

This is intended to ensure that a registered owner cannot circumvent this defence against trade mark infringement by imposing specific restrictions or conditions on licensees or other authorised users. These restrictions may still be imposed in licences, however, where the mark is being used contrary to that condition, the registered owner should seek a remedy from their licensee, not the parallel importer.

The Act also repeals section 198A of the Copyright Act which set out circumstances in which the parallel importation of copyright material did not infringe a registered trade mark.

What impact will this have for Australian businesses?

The changes mean that contractual or corporate arrangements that trade mark owners could previously rely on, such as under conditions similar to those in Lonsdale Australia Limited v Paul’s Retail Pty Ltd & Anor [2012] FCA 584, cannot be relied on anymore. If parallel importers comply with the section 122A(1) conditions, they will be able to import the goods. Up to now, there has been uncertainty for parallel importers importing goods into Australia, as they could not know if there were specific contractual arrangements in place, resulting in them falling foul of the legislation. The changes provide more clarity for parallel importers, provided they have carried out the necessary investigations.

It will remain to be seen how this will affect the market in practice. Many versions of trade marked goods are limited to certain regions or countries for good reason, such as due to differences in local laws or consumer demand. Warranties and safety warnings may be limited to purchases through a particular supply chain or country. Similarly, certain regulatory approvals may be tied to a particular company, which necessarily restricts the trade channels through which the goods may be supplied. Trade mark owners should educate their consumers regarding their products and warranties.

Trade mark owners still need to ensure that their distributors comply with their contractual arrangements. For example, if a distributor which is permitted to sell the goods in a country in Asia is knowingly selling to third parties for export to Australia, the trade mark owner could still seek to rely on its contractual rights to take action against its distributor.

Parallel importers should sufficiently document their inquiries (and responses to such inquiries) regarding the trade marks to show compliance with s 122A, if it is called into question. As each case will be dependent on the facts, it remains to be seen how the courts will interpret the new section.