Importing overseas products may be more costly than you think. A warning to retailers and importers.

As the cost of everything increases, retailers, importers and distributors are more and more tempted to purchase products from overseas for a cheaper rate and sell the items in Australia.

Paul’s Warehouse had this idea however a full Federal Court saw this as a breach of Trade Mark laws, and Paul’s has had to pay the price.

Parallel importing, is the legal term for the scenario where a product protected by a trade mark is offered for sale by a trade mark owner in one country, is re-sold in another country without the consent of the right holder, and therefore the re-seller is in direct competition with the trade mark owner. The importer or retailer can raise a defence under Section 123 of the Trade Marks Act which states that a registered mark is not fringed if the mark has been applied to the goods with the consent of the trade mark owner.

So what does this all mean in practice? A look at recent cases may give us a better idea.

1.         Paul’s Retail Pty Ltd v Sporte Leisure Pty Ltd [2012] FCAFC 51

Greg Norman Collections Inc (GNC) granted BTB Marketing PVT LTD (BTB), an Indian company a license to affix the Trade Mark “Greg Norman” and the Shark logo to clothing which BTB manufactured. BTB license was limited for distribution in India only. BTB, in breach of its license, manufactured goods bearing the GN Trade Marks and sold them outside of India. Paul’s Retail Pty Ltd (“Paul’s Warehouse”) imported these goods from the company outside of India and sold them in Australia.

Paul’s Warehouse tried to utilise the defence of Section 123 of the Trade Marks Act. Paul’s Warehouse argued the GN Trade Marks were applied to the goods with the consent of GNC.

The court did not accept Paul’s Warehouse argument and held that the registered owner of the GN trade marks did not consent to the manner in which BTB manufactured and applied the marks. GNC could not have consented because it did not have any knowledge of BTB’s breach.

In this case, if the goods had been manufactured by BTB for the sale within the territory, but then sold outside of the territory, the Court would have most likely accepted Paul’s Warehouse’s Section 123 defence and the GN trade marks would have been applied with the consent of the trade mark owner. It was BTB’s breach that was Paul’s Warehouse’s downfall.

2.         Paul’s Retail Pty Ltd v Lonsdale Australia [2012] FCAFC 130

The facts of the case are the English entity, Lonsdale Sports (LS) was the owner of Lonsdale trade mark for clothing. In 2009, LS licensed its trade mark to Punch GMBH to promote, distribute and sell products bearing the Lonsdale trade mark in Europe, and to manufacture the products in or outside Europe.

In 2011, Punch entered into a sales agreement with Unicell Limited (“Unicell”) to sell the Unicell products with the Lonsdale marks on an “ex-warehouse China” basis. At some time in 2011, Unicell sold to an American company TMS who sold to Paul’s Warehouse.

Previously Paul’s Warehouse had been purchasing Lonsdale products from an authorised re-seller of Lonsdale Australia products.

The court held that Section 123 did not apply for the following reasons:

  • The registered owner of the Australian Lonsdale trade marks, Lonsdale Australia, did not consent to the application of the trade marks to LS’s goods by Punch.
  • Punch was not a related entity to Lonsdale Australia.
  • Lonsdale Australia played no part in the European licence or in Punch’s application of the trade marks to the goods.
  • Lonsdale Australia took no steps which would be considered consent in relation to Punch’s activities.
  • Punch’s sale to Unicell which occurred in China was outside of its licence agreement with LS.

So what does this all mean?

These cases suggest that importers and retailers will need to ensure that the goods are genuine or correctly licensed. More onerously, retailers and importers need to be satisfied that their importation into Australia is within the scope of the conditions or territory directed in any licence agreement. If you are planning to import any goods having well-known brands applied to them then you should seek professional advice.

If you would like advice on parallel importing or protecting your brand, please contact us at Protect@ChrysiliouIP.com.au