Parallel importer guilty of trade mark infringement after importing ‘Lonsdale’ branded products

Parallel importer guilty of trade mark infringement after importing ‘Lonsdale’ branded products

Parallel importer guilty of trade mark infringement after importing ‘Lonsdale’ branded products

Lonsdale Australia Limited v Paul’s Retail Pty Ltd [2012] FCA 584

The Federal Court of Australia has found Paul’s Retail Pty Ltd guilty of trade mark infringement for a second time this year when it imported into Australia “Lonsdale” branded products without the consent of the owner of the Australian registered “Lonsdale” trade marks, Lonsdale Australia Limited.

The Federal Court held that this was not a case of parallel importation in the strict sense of the term, because Lonsdale Australia had not consented to the application of its trade marks to the goods in question and as such Paul’s Retail could not rely upon the defence to trade mark infringement under section 123 of the Trade Marks Act 1995 (Cth).

This case further clarifies the position under Australian law with respect to parallel importing, and is of relevance to trade mark owners when considering strategies to protect against infringement by parallel imports.

Paul’s Retail acquired “Lonsdale” products from European licensee

Lonsdale Australia is the current owner of various Australian registered “Lonsdale” trade marks (the Australian Lonsdale Marks). In 2011, its parent company, Lonsdale Sports Limited (LSL) transferred ownership of the Australian registered trade marks to Lonsdale Australia, who then licensed a distributor of Lonsdale products in Australia (the Australian distributor). At the same time, LSL licensed an unrelated German company to manufacture, distribute and sell Lonsdale products within Europe (the European licensee).

Paul’s Retail had previously sold through its retail outlets “Lonsdale” branded products which it had acquired from the Australian distributor. Around April 2011, the Australian distributor ceased supplying Paul’s Retail, and in August 2011, Paul’s Retail ordered 293,329 “Lonsdale” branded products manufactured by the European licensee for Lonsdale products (who was licensed by LSL).

In April 2012, the first shipment of the “Lonsdale” branded products which Paul’s Retail had acquired from the European licensee arrived in Australia (the European Lonsdale goods). Paul’s Retail sold $344,838.50 worth of those goods in its stores. However, another shipment of goods valued at $1,736,613 destined for Paul’s Retail’s stores was seized by Customs pursuant to a Customs Seizure Notice, which Lonsdale Australia had lodged with Customs.

In May 2012, Lonsdale Australia commenced trade mark infringement proceedings against Paul’s Retail under section 120 of the Trade Marks Act seeking amongst other things an interim injunction to prevent Paul’s Retail from importing, promoting, distributing, offering for sale and selling the European Lonsdale goods. On 23 May, the Federal Court granted the interim injunction, partly on the basis that the seized goods that were being held by Customs would be released before the date of the hearing and judgment. The case subsequently went before Justice Gordon on 31 May.

Trade mark infringement and parallel importation

Section 123 of the Trade Marks Act provides a defence to trade mark infringement in the following circumstance:

“…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.”

Parallel importation refers to when a third party imports “genuine” branded goods (in the sense that the registered trade mark owner (or its authorised licensee) has applied the mark to the goods in an overseas country) into Australia without the consent of the trade mark owner. Parallel importation does not usually constitute trade mark infringement, as the trade mark on the imported goods is usually applied with the consent of the trade mark owner, and as such the section 123 defence will apply.

Section 123 of the Trade Marks Act did not apply to the European Lonsdale goods

Paul’s Retail sought to rely on the section 123 defence to the trade mark infringement allegations made against it. It submitted that it did not infringe the Australian Lonsdale Marks in contravention of section 120 because the marks were legitimately applied by LSL’s European licensee and as such they were “genuine” Lonsdale goods.1

Even though the goods were sourced from the European licensee, Justice Gordon held that Paul’s Retail had infringed the Australian Lonsdale Marks and that section 123 of the Trade Marks Act did not apply. In reaching this conclusion, Her Honour found that:

  1. the trade marks applied to the European Lonsdale goods were substantially identical with and/or deceptively similar to the Australian Lonsdale Marks2 (this was not in issue and was conceded by both parties);
  2. Paul’s Retail “used” the trade marks for the purposes of section 120 of the Trade Marks Act when it imported, offered for sale and sold the European Lonsdale goods3 (confirming previous decisions that importation alone can constitute “use” of a trade mark by the importer); and
  3. section 123 of the Trade Marks Act did not apply because the registered owner of the Australian Lonsdale marks, Lonsdale Australia, had not consented to the application of the trade marks to the European Lonsdale goods by the European licensee (the European licensee was a German company that was unrelated to the Lonsdale corporate group). Justice Gordon based this finding on the following factors:4
  • the chain of title or the supply chain did not show that Lonsdale Australia played any role in the European licensee’s application of the trade marks to the goods;
  • the European licensee that applied the marks did not belong to the same corporate group as Lonsdale Australia; and
  • there was no evidence to suggest that Lonsdale took any step, or failed to take any step, that could be considered “consent” in relation to the European licensee’s activities.

This case also confirmed that the onus of establishing consent for the purposes of section 123 lies with the parallel importer, and in this case the Judge held that Paul’s Retail had failed to discharge its evidentiary burden.5

Another important consideration was that the European licensee had breached its own license agreement with LSL, as some of the marks that it had applied to the goods were not actually covered by the European license agreement. The Judge held that these goods were clearly “counterfeit” goods (as the marks had not even been applied with LSL’s consent) to which the section 123 defence could not apply regardless.6

Justice Gordon also noted that in these types of cases, where there are elements of parallel importation, “it is important to focus upon the trade marks registered in Australia, the identity of the parties involved and the transactions preceding the arrival of the goods bearing the allegedly infringing marks.”7

Lessons for trade mark owners

This was a case in which different corporate entities within the same global group owned the trade mark registrations in different countries. Had the “Lonsdale” trade marks been owned by one global entity, the outcome of this case might have been different. It is important to bear in mind that although this corporate arrangement may have assisted Lonsdale Australia in this case to prevent the sale of parallel imports, this arrangement might not be appropriate in all cases. In particular, under the Australian Trade Marks Act a trade mark owner must “use” its registered trade mark (so that the mark is not vulnerable to removal or cancellation) by exercising some degree of quality and/or financial control over the goods to which the mark is applied.8 In this case, the evidence showed that Lonsdale Australia designed and arranged the manufacture of goods that bore the Australian Lonsdale Marks which were different in terms of design, composition and quality compared to their European counterparts.9

This case also highlights the importance of putting in place enforcement procedures with Australian Customs (through the lodgment of Notices of Objection which may cover registered trade marks and copyright material) to protect against intellectual property infringement. These procedures (which will be strengthened next year as a result of recent reforms to Australian intellectual property legislation) can result in the identification and detainment of infringing (or potentially infringing) goods at the Australian border, before the goods enter the Australian market.

Paul’s Retail has recently been granted leave to appeal Justice Gordon’s decision to the Full Federal Court. The appeal is set to be heard in August, and we will keep you updated of the outcome.

Endnotes

  1. Lonsdale Australia Limited v Paul’s Retail Pty Ltd [2012] FCA 584 at [23].
  2. Ibid at [20].
  3. Ibid at [22].
  4. Ibid at [50] to [52].
  5. Ibid at [48].
  6. Ibid at [27].
  7. Ibid at [9].
  8. Section 8 of the Trade Marks Act 1995 (Cth).
  9. Lonsdale Australia Limited v Paul’s Retail Pty Ltd [2012] FCA 584 at [50].