Ralph Lauren is among many brands to have lost a parallel import battle in the federal courts. A recent case is cause for hope, Jane Owen writes.
The Australian fashion industry has long been plagued with parallel imported products – seemingly “genuine” or “grey” goods which have been sourced for sale in Australia outside the brand owner’s authorised distribution network.
We often know the source of the goods – overrun product from an authorised manufacturer, or a run of seconds product not conforming to the brand owner’s standards and which would not normally find its way to the retail market.
However, until a recent decision of the Federal Court, intellectual property laws in Australia have been of limited assistance in preventing the import and sale of these goods.
In a judgement handed down on October 29, the Federal Court ruled that Greg Norman branded garments imported and sold in Australia, and manufactured by the then Indian manufacturer and exclusive Indian distributor of Great White Shark Enterprises Inc, infringed the “Greg Norman” and shark device marks used on “Greg Norman” clothing (Sporte Leisure Pty Ltd v Paul’s International (No 3) [2010 FCA 1162).
This is the first Australian case where trade mark rights have assisted the brand owner in protecting its international distribution network. It shows that by tight contractual restrictions on local manufacturers and distributors, trade mark owners can more closely police the flow of grey goods.
The infringing clothing was imported by Paul’s Retail Pty Ltd, one of the companies behind Paul’s Warehouses. The product was manufactured by BTB Marketing PVT, the exclusive Indian manufacturer, distributor and licensee of the Greg Norman brand.
Sunsports, a company operating out of Pakistan, approached BTB requesting the supply of Greg Norman product. BTB agreed to supply the product to Sunsports in Pakistan, even though Pakistan was not part of its distribution territory.
In fact, BTB’s rights were expressly restricted to India – the relevant contractual terms granted the Indian company a non-exclusive licence to use the Greg Norman trade marks in India only.
Pursuant to a clause of the licence agreement, the Indian manufacturer expressly acknowledged that its licence to use the trade marks was limited to India, and it would not sell licensed products outside India without the licensor’s prior approval.
BTB manufactured products for Sunsports, and shipped the products to Karachi, via Singapore. However, the products were unloaded in Singapore and then imported into Australia by Paul’s Retail.
Sporte Leisure, the exclusive Australian distributor, argued that the goods were not authorised, and the import and sale of the products in Australia by Paul’s Retail was use of the trade marks in respect of the goods for which they were registered, without the owner’s authority, thereby infringing the trade marks.
Paul’s Retail claimed that because the clothing was manufactured by a licensee of the Greg Norman trade marks, the trade marks had been applied to the clothing it had imported with the consent of the trade mark owner, giving rise to a defence to trade mark infringement (pursuant to Section 123 of the Trade Marks Act).
In one of the few cases which have considered the operation of Section 123, the court held that where an owner of registered trade marks consents to another person applying that mark to goods on the condition that the goods must not be distributed outside a designated territory, that consent will not extend to the goods manufactured with the intention of distribution outside that territory.
Because the products supplied into Australia had been manufactured by the Indian licensee specifically for the purpose of exporting the product to Pakistan, the court held that the effect of this contractual prohibition was that the owner of the trade marks had not provided its consent to apply the trade mark to those goods.
This case reinforces the importance of managing trade marks to prevent the flow of parallel or “grey” imports into Australia. One way trade mark owners can control the flow of grey goods into Australia is to ensure local manufacturers are expressly prohibited from supplying the goods outside the licensed territory.
This judgement gives trade mark owners comfort that the courts will not allow the use of the defence in Section 123 of the Trade Marks Act to assist traders of grey goods to flout trade mark owners’ territorial licensing arrangements.
Jane Owen is a partner with Middletons law firm’s Intellectual Property Group.