In Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2016] FCAFC 91 (24 June 2016), the Full Court of the Federal Court of Australia upheld the trial judge’s decision that repackaging parallel imported cigars to comply with plain packaging legislation in Australia and selling these goods does not constitute trade mark infringement. While this case may be of concern to brand owners who wish to prevent unauthorised repackaging, certain steps can be taken to minimise this risk.

The facts

Scandinavian Tobacco manufactures cigars overseas where it applies its registered trade marks “CAFÉ CRÈME”, “HENRI WINTERMANS” and “LA PAZ” on the packaging for these goods.

Trojan imports Scandinavian Tobacco’s cigars into Australia and repackages them prior to sale so that they comply with Australia’s plain packaging legislation. In the course of repackaging, Trojan employs strict quality control measures to maintain the integrity of the product and reapplies the relevant marks. The original manufacturer’s barcode and details are retained on the new packaging. Scandinavian Tobacco brought proceedings claiming that Trojan’s conducted constituted trade mark infringement, contravention of the Australian Consumer Law, and passing off.

Trojan does not infringe

Although Trojan’s importation and sale of Scandinavian Tobacco’s goods constituted unauthorized trade mark use by Trojan, it was able to rely upon a defence in s 123 to escape infringement.

Section 123 provides a defence to infringement where 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.

The Full Court held that s 123 will apply if, at some point in the past, the registered owner consented to the application of the mark on the goods, even if, as in this case, the goods have been subsequently repackaged and no longer bear the mark as originally applied by the registered owner.

What about the likelihood of confusion and deception?

While unauthorised repackaging could arguably lead consumers to believe that Scandinavian Tobacco was responsible for the packaging and that it either applied or consented to the application of the registered marks in their re-packaged form, the Full Court was clear: such concerns are not relevant in considering the application of s 123.

The potential for consumer confusion is better addressed under a passing off or Australian Consumer Law action, which prohibits misleading or deceptive conduct.

However, Scandinavian Tobacco also failed on these claims as its evidence did not demonstrate that a purchaser of re-packaged cigars bearing its marks would assume that the packaging had been done by or under its authority.

Can brand owners prevent unauthorised repackaging through other means?

Yes. One option is to display a “Section 121 notice” on the goods.

Section 121 allows a trade mark owner to display a notice on its goods which prohibits certain acts, including applying the mark to goods after the original packaging has been altered. Where a third party engages in the prohibited act, it will infringe the trade mark unless it acquired the goods in good faith without being aware of the notice.

A further avenue is to bring proceedings under the criminal provisions of the Trade Marks Act 1995, which include prohibitions on falsifying or removing a registered trade mark (s 145) and falsely applying a registered trade mark (s 146). There is scant case law on these provisions and it is generally difficult to prove the elements of the offences. Interestingly, proceedings had been brought against Trojan in 2010 for engaging in conduct which allegedly breached these provisions by placing mandatory warning labels on cigarette packaging which partly or wholly erased or obliterated the registered trade mark. However, the case did not proceed to a final decision on the substantive issues.[1].