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Court rules to stop parallel imports

NewsFlash 14 September 2012

If you are a manufacturer of goods with concerns about parallel imports or you import branded goods into Australia the decision of the full Federal Court handed down on Tuesday in Paul’s Retail Pty Ltd v Lonsdale Australia Limited [2012] FCAFC 130 will be of great interest and of potential use to you.

The judgment confirms the decision made in June this year by Justice Gordon in Lonsdale Australia Limited v Paul's Retail Pty Ltd & Anor [2012] FCA 584. Justice Gordon’s decision made it possible in certain circumstances for global brand owners to prevent third parties ‘parallel importing’ - that is importing genuine goods into Australia that have been purchased by the importer overseas (often for a lower price than the manufacturer is selling similar goods in Australia).

Before the decision in Lonsdale, Australian brand owners had only succeeded in preventing imports of goods bearing a brand if the brand was owned in Australia by a party which was unrelated to the owner of the same brand overseas.

Consent to use of trade mark as defence to infringement

At the centre of the issue is section 123 of the Trade Marks Act which provides that it is not an infringement of a trade mark to import goods bearing that trade mark or brand where the owner of the brand has consented to the brand being used on the goods. Case law has extended this concept so that if a company related to the Australian brand owner gave its consent (or for example, the overseas branch of the Australian company manufactured the goods bearing the brand) then the consent of the Australian brand owner was taken to have been given. As a result, it has been difficult for global companies to prevent parallel imports into Australia.

Key outcomes of the Lonsdale decision

As a result of the Lonsdale decision (now confirmed by the full Federal Court) it is important for both importers and brand owners to be aware that:

  • In an infringement action, it will be the responsibility of the importer to prove that it has the consent of the Australian brand owner to import goods;
  • If the corporate structure of a global group is such that the brand is owned in Australia by the group entity based in Australia and that entity has some control over the use of the brand, it will be difficult for the importer to successfully argue that consent has been given by that Australian owner (even where the importer has purchased goods from a related entity which had rights to use the brand overseas);
  • If the goods were purchased from a third party licensed by the brand owner to manufacture the goods overseas and that licence specifically prevents the licensee from selling goods outside the licensed territory then the consent of the brand owner is not taken to have been given.

The situation has changed – take action to review your position now

Whilst the situation in Lonsdale is factually complex and in all situations the final outcome will depend upon the facts, there is no doubt that the decision has paved the way for Australian brand owners and corporate groups to organise themselves and their licensees in such a manner that parallel imports into Australia of goods manufactured for an overseas market may be prevented.

Trade mark owners need to consider their corporate structures and the manner in which brands are owned and licensed within and outside those structures both nationally and internationally to determine if they can potentially obtain the protection offered by the decision in Lonsdale. Given proposed changes which will come into effect in April 2013 to the manner in which Customs Notices can be used, it may also be time to review your strategy to make sure that you are notified by Customs whenever goods bearing your trade marks are imported.

For importers, the decision means that it will be prudent to verify that the goods you are purchasing are not only legitimate, but that the seller has the right to sell the goods in Australia (and is not limited to a particular distribution area). At the very least, importers should ensure their purchase agreements contain appropriate warranties as to the seller’s right to sell the goods.

With many years of experience in representing brand owners, we can assist with advice and documentation in relation to all of the above issues.

Clare Mirabello, Special Counsel

NewsFlash 14 September 2012
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