Trademarks and Parallel Imports

On 24 August 2018, the Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Act 2018 (Act) received Royal Assent. This Act represents a shift in policy for dealing with trade marked goods and parallel imports. Trade mark owners are no longer able to block parallel importation of their products by assigning the mark to a local distributor.

PARALLEL IMPORTS

Genuine, trade marked goods are produced by a trade mark owner or its appointed manufacturer. A manufacturer can choose to supply their goods to different countries through different authorised channels, which can result in similar goods being supplied for different prices. They may also grant a license to a local manufacturer, to distrubute genuine goods, which may include the assignment of the local trade mark to that local distrubutor. 

When a genuine good is imported into Australia through channels not authorised by the manufacturer, it is called a parallel import. This is in contrast to counterfeit goods or pirated goods, which are not made by an authorised manufacturer.

There are drawbacks to parallel importing - if the goods are faulty or misrepresented under the Australian Consumer Law, there may be little redress for consumers.

BACKGROUND

The Explanatory Memorandum of the Act states that the amendments were made to the intellectual property system in Australia in order to foster investment in creativity, innovation, research and technology.

In 2016, the Productivity Commission published its report on Australia’s intellectual property framework. Recommendation 12.1 stated that “parallel imports of [trade] marked goods [should] not infringe an Australian registered trade mark where the marked good has been brought to market elsewhere by the owner of the mark or its licensee”.

Prior to the amendments in the Act, section 123 of the Trade Marks Act 1995 (TM Act) contained a defence to trade mark infringement.This defence could be claimed by unauthorised importers where the trade mark had already been applied with the consent of the trade mark owner. This means that the trade marked goods were imported with the authorisation of the trade mark owner.

Various cases tested the extent of the s 123 defence, in particular its territorial limits. [1] It was consistently found that where the foreign based trade mark owner was unrelated to the local authorised distributor, it was a defence for the unauthorised importer to claim that the mark had been applied with the consent of the foreign based owner. This resulted in foreign owners assigning the trade mark to a local entity or distributor alongside a distribution agreement. The mark would revert back to the foreign trade mark owner when the distribution agreement had expired. As a result of the assignment of the trade mark, unauthorised importers were no longer able to rely on the consent of the foreign based trade mark owner. The defence would not be applicable without the consent of the locally based trade mark owner, who would not provide the consent.

SECTION 97A - NEW ZEALAND TRADE MARKS ACT

The Productivity Commission report suggested that any reform be based on s 97A of the Trade Marks Act 2002 (New Zealand) (NZ Act).

Section 97A of the NZ Act is titled ‘Exhaustion of rights conferred by registered trade mark’. The reform was introduced to address a situation where registered trade marks were transferred or assigned to a local subsidiary or another entity. This exhaustion is referred to as ‘international exhaustion’, whereby it does not matter where the trade mark has previously been applied.

PARALLEL IMPORTS IN THE ACT

The Act introduces a new s 122A and repeals the former s 123. These amendments do not go as far as the NZ Act. This new section states that parallel imports are permissible, if:

1. The goods are similar to the genuine goods;

   This is defined in s 14 of the TM Act. Goods will be similar to other goods where they are the same or of the same description as other goods.

   This provides that some goods made by the same manufacturer are alike, but different. For example, electrical goods manufactured in Asia, the UK or America are likely to have different electrical plugs and wattages to Australian goods.

2. Before use or distribution, the parallel importer makes reasonable inquiries in relation to the trade mark;

   The Explanatory Memorandum states reasonable inquiries will be based on subjective circumstances of each import and good. It states that, for example, where the prices offered by a supplier are significantly lower than other similar goods, the reasonable parallel importer must make further inquiries and perhaps even go as far as to contact the trade mark owner. A certificate of authenticity from the supplier should suffice reasonable inquiries.

3. After making inquiries, the parallel importer should be able to conclude that the trade mark had already been applied to the goods by or with the consent of the relevant person, which includes the trade mark owner, authorised local distributor or an associated entity of the trade mark owner.

The Act does not apply retrospectively. It applies only to trade marks applied after 25 August 2018, the day after the Act received royal assent.

EXHAUSTION OF RIGHTS

Another key change in the Act is referred to as ‘exhaustion of rights’. This means that the use of a trade mark in relation to goods is not an infringement of the trade mark owner’s rights over the mark, if the goods have been put on the market with the consent of the trade mark owner under the registered trade mark. 

As such, the trade mark owner’s rights are exhausted and unenforceable following the authorisation of a local distributor to use the mark in another country, or the assignment of their right to the mark. This essentially removes any territorial limits which were previously applied.

CONCLUSION

The scope of the amendments has not yet been tested in an Australian court, however it is important to note that these new changes do not apply to designs or copyright legislation. As such, it is not permissible to import a good which has a registered design without the consent of the registration owner. 

Please contact Andrew Chalet from our Corporate & Commercial team if you would like to learn more about the amendments to the Trade Marks Act 1995 and the importation and sale of foreign trade marked goods.