Brand sets new copyright precedent

SYDNEY: Exclusive distributors of international fashion brands can not rely on copyright laws to prevent the practice of parallel importing, legal experts have warned.

Earlier this month, designer giant Ralph Lauren failed in its bid to prevent a Sydney retailer buying legitimate shirts cheaply in America and selling them for profit in Australia. The practice, known as parallel importing, involves the sale of genuine designer goods sourced from countries that trade them at a cheaper price.

Provisions in Australian copyright laws state it is not an infringement to import a genuine product without the permission of a copyright owner, even if the labelling, packaging or even instructions attached to the product are protected by copyright. In the hearing Federal Court judge Steven Rares said although shop owner Adam Zilliani was not a licensed owner of the copyright in Australia, the embroidered pony on Ralph Lauren shirts was a "label" - making it exempt from national copyright law.

McCullough Robertson senior associate James Cameron said the provision moved into "sticky" territory when the goods in question were not counterfeit but made by the owner of the copyright overseas.

"Since the mid 1990s, one of the policy drivers behind Australia's intellectual property laws have been amendments to prevent those laws being used inappropriately to reduce competition," he said. "These changes included relaxation of the effect those laws have on the act of parallel importing."

Cameron said the recent Federal Court case did not change existing copyright laws but confirmed that brand logos and trade marks embroidered onto garments were, for the purposes of copyright law and the Copyright Act 1968, in fact labels.

It also meant international brands now had a legal precedent in place which confirmed the use of copyright law to prevent parallel importing was limited, he said.

"Labels and their distributors need to be aware that this decision only relates to parallel importing as it relates to copyright in labels. There are separate laws relating to whether registered trade marks, patents and designs can be used to prevent parallel imports. Depending on the type of product being imported, these other provisions could have a significant impact on the outcome."

Cameron admitted this was a complex and at times uncertain part of copyright law but the decision should not be interpreted as an endorsement of parallel importing for any product - whether it be textiles, headwear, garments or shoes.

"Stakeholders may want to seek legal advice on other intellectual property strategies they might be able to use to help prevent parallel imports," he said. "This might include strategies associated with carving up ownership of intellectual properties across territories and looking to intellectual property laws relating to trade marks and registered designs."

Middletons partner Tony Watson said while there was indeed "no scope" to prevent the parallel importing of copyrighted works, multinational companies could turn to trade mark law.

"Arrangements whereby the trade marks are held by a third party, provided they can be established to be held on bona fide commercial grounds, can possibly still be an effective means to prevent parallel importation."

Although some legal commentators have alleged the practice is on the rise, researchers at the Australian Centre for Retail Studies said no official statistics existed to back this claim. Program director Andrew Cavanagh said it was common in areas such as cosmetics, computers and apparel with the parallel importing of Levi's jeans rampant throughout the late 1980s and early 90s.

"In my opinion, in a large number of instances, the attraction of parallel importing can be reduced by suppliers and retailers working together to improve supply chain efficiencies and margins," he said. "The onus is on the suppliers and local agents to ensure there is no need to look for a cheaper source of the product."

By Assia Benmedjdoub