Parallel imports can infringe a registered Australian trade mark
Sporte Leisure Pty Ltd v Pauls Warehouse International Pty Ltd (No. 3)  FCA 1162
The Federal Court of Australia has recently confirmed that even though goods bearing a trade mark registered in have been manufactured overseas with the consent of the Australian trade mark owner the unauthorised importation of those goods into and the sale of those goods in Australia may infringe the registered trade mark.
Facts of the case
The case of Sporte Leisure Pty Ltd v Pauls Warehouse International Pty Ltd (No. 3)  FCA 1162 involved clothing imported into and sold in Australia bearing either or both of the trade marks comprising the words “Greg Norman” and/or the stylised Shark device.
The critical issue in the case was whether the trade marks were applied with the consent of Great White Shark Enterprises LLC (“GWS”), the second Applicant and Australian registered owner of the trade marks, to the articles of clothing which were ultimately imported into and sold in Australia. If there was such “consent” then section 123 of the Trade Marks Act 1995 (Cth) would have applied and there would have been no infringement.
The Court held that whilst the articles of clothing bearing the registered trade marks were manufactured in India under licence from GWS, the permission to manufacture was relevantly qualified by the limitation that those goods could only be manufactured for retail sale within India.
Consequently, the importation of those goods into Australia and the sale of those goods in Australia through the “Paul’s Warehouse” chain of discount stores were held to infringe the rights of the second Applicant. The second Applicant never intended for those goods manufactured by its licensee in India to be sold in Australia. The Respondents in Sporte Leisure had conceded that even if the registered marks on the imported goods were applied with the licence of the trade mark owner, they had nonetheless engaged in trade mark use. This concession enabled the Court to hold that infringement had occurred.
A considerable part of the judgment focuses on which of the Respondents was responsible for the importation into and the sale of the garments in Australia. The evidence showed inconsistencies between the “ABN” and company name references appearing on the order for the garments. In respect of the retail sales in Australia, the receipts from sales of the infringing goods contained references to both the business name “Paul’s Warehouse” (which was registered as a business name in New South Wales to the first Respondent Paul’s International Pty Ltd) and to the company name “Paul’s Retail Pty Ltd” (the second Respondent). Unimpressed by the evidence given by Mr Paul Dwyer (the fifth Respondent) to explain the operations of the “Paul’s Warehouse” business, the Court ultimately held that the infringing goods were imported into Australia, offered for sale and sold at the “Paul’s Warehouse” stores by the second Respondent, Paul’s Retail Pty Ltd.
The Court also held that the goods which were ultimately imported into and sold in Australia were manufactured by a licensee of the Australian trade mark owner knowingly in breach of its licence because they were to be sold to a customer outside of India.
Ultimately, the Federal Court held that each of the following acts amounted to trade mark infringement as involving the use of the registered trade marks in the course of trade:
- the importation of the goods for the purpose of sale into Australia;
- the sale and offering for sale of the relevant goods in Australia;
- the distribution of the goods for the purpose of sale in Australia.
The Federal Court however held that Paul’s Retail Pty Ltd did not cause or procure the manufacture of the relevant goods.
Director’s liability as joint tortfeasor
Notwithstanding the finding of infringement against Paul’s Retail Pty Ltd, the Court dismissed the claim against Paul Dwyer for liability as a joint tortfeasor. Despite accepting that Mr Dwyer, the sole director of Paul’s Pty Ltd, “ran the company as if it was his own” and “exercised close personal control over other employees who were involved in its business” and that “he was closely involved in the importation and sale of the infringing products”, the Court held that the infringing acts were those of Paul’s Retail Pty Ltd and not Mr Dwyer. The Court held that Dwyer believed that the infringing goods were “genuine goods”, having been manufactured with the licence of the trade mark owner and that he had no other reason to believe that the importation or sale of the goods would constitute an infringement of any of the relevant trade marks. The Court specifically referred to the steps taken by Mr Dwyer to satisfy himself as to the genuineness of the goods being offered to him, including his dealings with the supplier of the goods and his own inquiries on the Applicant’s website and it concluded that there had been no “reckless indifference” on his part.
Misleading and Deceptive Conduct and Misrepresentation
The Federal Court separately upheld the claim against Paul’s Retail Pty Ltd for misrepresentation and misleading and deceptive conduct. The second Respondent had advertised the infringing goods for sale at a “minimum of 40% off” the recommended retail price for those goods. The Court held that the recommended retail prices quoted in the second Respondent’s brochures were overstated. It followed that the representations made in the brochures as to the amounts saved were also false and misleading.
Not all seemingly “parallel imported” goods will avoid infringement. The circumstances surrounding the application of the registered trade mark to the goods may fall short of satisfying the statutory requirement in section 123 of the Trade Marks Act 1995 (Cth) of having been applied “with the consent of the registered owner”. If so, the “parallel import defence” will fail. Such circumstances will usually centre on a restriction on the right of the person applying the trade mark to deal with the goods to which it applies the trade mark. For example:
- limiting the number of goods to be made;
- restricting the persons to whom such goods can be supplied.
Sporte Leisure is also noteworthy for its comments on the following:
- Infringement of an Australian registered trade mark only occurs when the sign alleged to infringe is used “as a trade mark”. The registered owner has the onus of establishing such infringing use.
- Any defences to trade mark infringement provided for in sections 122 or 123 of the Trade Marks Act 1995 (Cth) are only relevant once a case of infringement has otherwise been made out.
- As a defence to infringement, it is the person who seeks to rely on section 123 (“the parallel imports defence”) who carries the onus of proof to establish its application. However, it may take little to shift the evidential burden back to the party asserting infringement. The Federal Court noted (at ) that there will be certain situations where a registered owner is best placed to know whether a mark has been applied with or without their consent.
- For a director to be held liable as a joint tortfeasor for trade mark infringement, the extent of the director’s personal involvement in the commission of the infringing acts will be critical and their state of mind will itself be important in determining the extent of their involvement. However, the authorities do not go so far as to prescribe knowledge that the relevant acts are infringing as a prerequisite to personal liability.
- As far as it relates to goods, section 123 of the Trade Marks Act 1995 (Cth) provides as follows: In spite of section 120, 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 mark.