In brief

  • Parallel importers are able to rely on a defence to trade mark infringement available where the trade mark owner consented to the application of the trade mark to the goods.
  • In the latest case of parallel importing the Full Federal Court has held that the existence and nature of the ‘consent’ must be determined on the facts. If the brand owner has granted a licence to apply the relevant trade mark to goods which are restricted to sale and supply to a foreign market, that licence will not be treated as consent for the licensee to manufacture goods for the Australian market.

‘Parallel importation’ refers to the importation, through unauthorised trade channels, of legitimately branded products intended by the trade mark owner for sale in a different market. With the strength of the Australian dollar, and the availability of a wider variety of branded products in overseas markets, parallel importation has become an increasingly important issue for Australian brand owners, distributors and retailers.

The facts

This case concerned the parallel importation of LONSDALE branded goods.

Lonsdale Sports Limited (LSL) is the owner of various LONSDALE trade marks around the world. In May 2009, LSL granted Punch GmbH (Punch) Punch a non-exclusive licence to manufacture goods bearing the LONSDALE marks and to promote, distribute and sell those goods in specific European countries including Cyprus.

In June 2011, LSL assigned its Australian LONSDALE trade mark registrations to Lonsdale Australia Limited (Lonsdale Australia). LSL and Lonsdale Australia share the same ultimate holding company, Sports Direct International.

In August 2011, Punch entered an agreement to sell LONSDALE branded products to Unicell Ltd, a company incorporated in Cyprus. The LONSDALE goods were manufactured in China for Unicell who acquired the goods ‘on an ‘Ex-Warehouse’-China basis’. Unicell made payment and then took possession of the goods from Unicell’s warehouse in China. The LONSDALE goods were not sent to Cyprus. Instead, between December 2011 and April 2012, PW Inventory Pty Ltd and Paul’s Retail Pty Ltd (together, Paul’s) purchased, imported into Australia and sold the LONSDALE goods.

Consent of the registered owner

Lonsdale Australia brought proceedings alleging that the importation and sale of the LONSDALE goods infringed its trade mark registrations.

The Trade Marks Act provides a defence to infringement ‘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.’

Paul’s argued that the LONSDALE marks were applied to the LONSDALE goods with the consent of the registered owner of the trade mark. In order to make out this defence, Paul's needed to demonstrate that:

  1. the LONSDALE marks were applied to the goods with LSL’s consent, and
  2. LSL’s consent was sufficient for the purpose of the defence (given that Lonsdale Australia is and was since June 2011 the registered owner of the Australian trade marks).

Application of marks was without consent

With respect to the first question, the court held that the question of whether the mark was applied with consent of the registered owner is a question of fact in the circumstances of the particular case. The objectively determined intention of the owner is relevant to this determination.

The consent that LSL gave to Punch was expressly limited to promotion, distribution and sale of LONSDALE goods in specific European markets. The court found that the sale of goods outside of these European markets, ie the delivery and sale of goods in China to Unicell, was not authorised by the licence. Therefore, there was no relevant consent from LSL.

If Unicell had taken delivery of the relevant goods in Cyprus, rather than China, or even if the goods had subsequently been sent to Cyprus before Australia the factual situation may have been sufficient to find that the marks were applied with LSL’s consent. However given that the court found that the ‘sales’ took place in China it did not need to consider this point.

Sufficiency of consent from LSL

Paul’s argued that LSL’s consent was sufficient for the purposes of the defence either because:

  • it owned the Australian registrations at the time it entered the licence with Punch, or
  • if the time of the manufacture of the LONSDALE products was what was important for the purpose of the defence, LSL gave the consent for Lonsdale Australia as they were in the same corporate group with a common ultimate parent.

These arguments provided the court with the opportunity to consider a couple of significant areas of uncertainty, outlined in the following paragraphs, which can arise in the context of parallel importation. Unfortunately, the court expressly refrained from providing guidance on either of these issues because of its finding as to a lack of consent by LSL.

First, it is not uncommon for a foreign trade mark owner to assign its Australian trade marks to a separate company so that there is a separation of ownership of the Australian trade marks from those owned elsewhere. As in the LONSDALE case, this assignment of rights may occur in the midst of an ongoing commercial arrangement for production of goods. The Australian courts have not determined what affect an assignment has on any previously granted consents.

Further, the assignment of the trade marks may be to a related company or an unrelated company. In the United Kingdom, it has been held that if a subsidiary company in a corporate group owns a trade mark, the mark can be treated as an asset of the entire group. Therefore consent of a single group company can be treated as consent from the entire group1. Until this issue is addressed by the Courts, it is not known whether the defence will be available where a related entity to the Australian trade mark owner has provided consent.

The court expressly refrained from determining whether LSL’s consent would have been sufficient to enliven the defence as it was unnecessary for it to do so.

Implications for brand owners, distributors and retailers

The law surrounding parallel importation of branded products is complex. This case highlights that findings of trade mark infringement are highly dependent on the particular factual circumstances. These may be very difficult to establish.

Australian trade mark owners and authorised distributors need to take care in structuring their trade mark ownership to ensure that they are protected from parallel importation. Australian importers and retailers wishing to sell goods obtained through parallel importation also need to ensure that they are properly advised so that they do not unintentionally infringe Australian registered trade marks.