Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2015] FCA 1086 (9 October 2015)

In a decision that may have wider implications for control of trade marks and packaging, the Scandinavian Tobacco Group (STG)1 has failed in a claim that parallel tobacco importer Trojan Trading Company Pty Ltd (Trojan) infringed Australian trade marks2 STG has registered under the Trade Marks Act 1995 (Cth) (the Act).

As stated by his Honour Chief Justice Allsop, this case ‘raises a number of interesting issues as to the operation of sections 120 and 123 of the Act in the context of parallel importing of tobacco products now that the Commonwealth Parliament has required plain packaging of … all tobacco products’.3

The Court’s reasoning and conclusion can be seen as a threat to the control that registered trade mark owners are able to exert over the packaging of their products and also, in some cases, the quality of products bearing their trade marks.

The trade mark case

Trojan parallel imports cigars manufactured by, or with the consent of, STG in Belgium and Holland. The cigars are imported in STG packaging bearing STG trade marks. Trojan then re-packages the cigars in packaging compliant with the Australian Tobacco Plain Packaging laws. As part of this process, Trojan applies the STG trade mark to the new packaging.

STG sought interlocutory relief claiming inter alia4 that Trojan is applying the trade marks to or in relation to cigars without the control or consent of the trade mark owner, and then selling such products. STG further claimed that Trojan used those trade marks in its price lists and invoices to refer to such products no longer controlled by the trade mark owner.

His Honour found that the use of the trade marks constituted an infringement under section 120 of the Act and that the defence in section 120 (a good faith use to indicate kind, quality, quantity, intended purpose, value, geographical origin or some other characteristic of goods or services) was not made out.5

However, Allsop CJ held that defence in section 123 of the Act was made out:

a person who uses a registered trade mark in relation to goods that are similar to goods in respect of which the trade mark is registered does not infringe the trade mark 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.

Consent to which application of trade mark?

STG submitted that section 123 ‘focuses upon the act of application physically present in the circumstances of alleged infringement’6, arguing that otherwise, ‘trade mark owners would lose all control over secondary get up and packaging so important to modern commerce; and they would be placed in a difficult position as to cancellation under s 88 of the Act based on deception or confusion because of that lack of control’.7

Allsop CJ however held that section 123 ‘looks to (a) the use of a trade mark in relation to goods (b) the similarity of the goods to those in respect of which the trade mark is registered (c) an enquiry whether the trade mark has been applied to, or in relation to, the very goods as in (a); and (d) whether that application was with the consent of the registered proprietor’8.

His Honour found that:

‘If one undertakes that enquiry, one finds that Trojan has used the trade marks in relation to cigars, being goods the same (and so similar: s 14(1)(a) of the Act) as those in respect of which the trade mark is registered, and the trade mark has been applied in relation to those very goods with the consent of the owner at the time of original packaging.’9

The Chief Justice did not favour the submission of STG - that the time to assess consent is at the time of re-packaging by Trojan. His Honour instead looked back to the time of the original packaging, noting Justice Middleton in Facton Ltd v Toast Sales Group Pty Ltd [2012] FCA 612 who stated that ‘a natural reading of the words used in s 123 suggest that the only time at which the issue of consent is to be assessed is the time of the application of the trade mark to goods’.10 In that case, the respondent purchased the applicant’s clothing and used the applicant’s registered trade mark on its promotional material to resell the clothing. The court found that the applicant consented to the respondent’s use of the trade mark at the time of manufacture when the trade mark was first applied to the clothing to which the promotional material related.11

Allsop CJ held that such a construction of section 123 ‘conforms with a purpose in s 123 of protecting as non-infringing use that which does no more than draw a connection between the goods and the registered owner, and does not draw a connection between the goods and the person using the trade mark being someone other than the registered owner’.12 His Honour found at [85] that this was consistent with the reasoning of Gummow J in Wingate Marketing v Levi Strauss 49 FCR 89 who stated that:13

The issue as to infringement … concerns the purpose and nature of whether [the applicant’s] trade marks are used by [the respondent] for the purpose of indicating, or so as to indicate, a connection in the course of trade between the garments and [the respondent]’.

The precedents relied upon with respect to section 123 deal with uses of trade marks such as promotions, advertising and sale after first application rather than a subsequent application of the trade mark to new packaging by a person other than the trade mark owner.

Allsop CJ used an analogy of a tie woven with a trade mark Z, in a pink box embossed with the same trade mark Z (both trade marks having been applied by the registered owner). It was accepted by STG there would be no infringement of the trade mark if the shop owner advertised his stock of ties with a sign bearing trade mark Z and invoices to customers with the same mark.14 There exists an implied consent by the registered owner of the trade mark to the advertising and invoices in the light of the trade mark on the tie, and therefore section 123 is engaged. Allsop CJ was of the view that the same implied consent of the registered owner of the trade mark exists in circumstances where a shop owner prefers selling the ties in a blue box upon which he places the trade mark Z, and the tie is taken out of the pink box and put in the blue box for display and sale. His Honour reasoned, ‘Has not the trade mark already been applied in relation to the good (the tie) by embossing on the pink box?’.15

By extension, Allsop CJ found that before Trojan unwraps the STG cigars, there are trade marks on the box that have been applied in relation to the cigars by or with the consent of the registered owner of the trade mark, being STG. When the repackaging occurs, the use of the trade mark by Trojan by its application on to the new packet, and thus in relation to the goods, was seen by the Court to fall squarely within the words of section 123.16

Plain packaging legislation and wider implications

Allsop CJ came to his conclusion in the context of Australia’s plain packaging laws, noting that Trojan’s repackaging of the cigars is necessary in order to comply: ‘if the Australian Parliament had not passed the plain packaging legislation,Trojan could have sold the cigars in the boxes or packets with packaging placed on them by STG’.17 However, the decision has wider implication in industries outside the tobacco industry. Australia has a number of regulatory regimes requiring specific labelling for particular products.  For example, food products must comply with the labelling requirements in the Food Standards Australia New Zealand Australia. Similarly, cosmetic products must comply with the Consumer Information Standards that relate to cosmetic products. 

On the basis of the decision of Allsop CJ, it appears that any importer of food or cosmetic products acquired overseas would be entitled to remove the products from the non-compliant packaging and repackage them in the importer’s chosen packaging for Australia. In the hearing before Allsop CJ, it appeared that quality control procedures had been instituted by Trojan. However, STG was in no position to monitor or control those procedures resulting in risk to STG. The decision does not address these concerns. In the case of food and cosmetic products the potential risk to quality involved in repackaging products could be greater than in the case of cigars. The decision, therefore, potentially challenges both a trade mark owner’s right to control the packaging in which its products are sold and even the quality of those products at the time they are packaged and offered to consumers.

The implications of this decision may be wider still. The Court’s construction of section 123 does not appear to be limited to an importer who changes the packaging in order to comply with local regulation. The impetus for repackaging may arise for any number of reasons including to serve commercial ends such as re-sizing, separate sale, changes to language and customising. The fact that Allsop CJ found that STG’s consent was given at the time of the original packaging, and that this is the relevant point for assessment, poses a threat to the control that all registered trade mark owners have over the packaging and quality of their products. To use the analogy of the Court, a trade mark owner may find its pink-boxed product repackaged (via processes unknown), marketed and sold in a blue box, with no control or recourse under the Act.

STC has filed has filed an appeal in relation to the Chief Judge’s finding at trial that section 123 of the Act was engaged. Trojan has filed a Notice of Contention in relation to the judge’s rejection of their section 120 defence.