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The parallel importer’s problem: proving consent
Brand owners will be pleased with a recent Federal Court decision which is likely to cause some problems for parallel importers.
Parallel imports (sometimes called ‘grey market’ goods) are genuine branded products that are imported directly from an overseas supplier instead of the brand owner’s usual trade channels and without the brand owner’s consent.
Section 123 of the Trade Marks Act provides a ‘parallel import defence. A person doesn’t infringe a registered trade mark if the mark is used in connection with goods and the mark has been applied to those goods with consent of the owner of the registered trade mark.
Lonsdale Australia is the owner of various Australian registered trade marks for ‘Lonsdale’. Lonsdale Australia’s parent company, Lonsdale Sports Ltd (‘LSL’) who owned the Lonsdale trade marks in other countries, licensed an unrelated German company (‘the German Licensee’) to manufacture and distribute Lonsdale branded products in Europe.
Paul’s Retail initially purchased Lonsdale branded products from Lonsdale Australia’s authorised distributor. However, in around April 2011, the Australian distributor stopped supplying Paul’s Retail. Paul’s Retail then approached the German Licensee and ordered around $2 million worth of Lonsdale branded products from it. Part of the order was seized by Customs due a Customs Notice which Lonsdale Australia had in place.
Lonsdale Australia sued Paul’s Retail for trade mark infringement.
The Federal Court decision
Before the Federal Court, Paul’s Retail sought to rely on the parallel import defence in s 123.
Justice Gordon held that the defence did not apply and that Paul’s Retail had infringed Lonsdale Australia’s registered trade marks.
Her Honour confirmed that the onus of establishing consent for the purposes of s 123 rests with the parallel importer. There were three ways that consent could be proven:
- By proving consent through chain of title or supply chain.
- By proving that the party that applied the trade mark and the Australian trade mark owner were part of the same corporate group.
- By proving conduct (doing or failing to do something) that, in the circumstances, amounts to consent.
Justice Gordon held that Paul’s Retail had failed to discharge the onus – the chain of title did not show that Lonsdale Australia had any role in the German Licensee’s application of the trade marks to the goods, Lonsdale Australia and the German Licensee were unrelated parties, and there was no evidence to show that Lonsdale Australia had taken or not taken any step that could amount to consent.
Accordingly, Paul’s Retail was held to have infringed Lonsdale Australia’s registered trade marks. Note that Paul’s Retail has been granted leave to appeal the decision to the Full Federal Court.
- The decision confirms that establishing the parallel import defence can be difficult for a parallel importer.
- The parallel importer bears the onus of proving consent within a very narrow definition of what can constitute consent.
- Brand owners need to pay very close attention to their trade mark ownership and licensing arrangements, corporate structure and supply chain if they are concerned about parallel imports.
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