Vigilance required: Trademark exhaustion and parallel importation in Australia

By:

Return to Law à la Mode: Issue 28

Maintaining the integrity of distribution channels is a key concern for brand owners, particularly in the fashion and luxury goods industries.

Until recently, ambiguity in the law around parallel importation has meant that businesses operating in Australia have been advised to structure their ownership of intellectual property and licensing arrangements in a way that would allow them to bring trademark infringement proceedings against unauthorized importers. However, amendments to the Trade Marks Act 1995 (Cth) mean that these measures are now largely ineffective. Only in rare circumstances will parallel importers be found to have engaged in trademark infringement.

In light of these changes, brand owners must be vigilant in the Australian market, proactively communicate to the market how they value their brand (e.g. educating consumers about authorized distribution channels) and be prepared to take action through means other than trademark enforcement.

Parallel importation defense

The amendments have introduced the principle of “trademark exhaustion,” whereby parallel importers will not be found to have engaged in trademark infringement if they can demonstrate that:

  • before its use, they had made reasonable enquiries about the trademark (i.e. taking active steps to determine if the mark was applied with consent) and
  • at the time of use, it was (objectively) reasonable for the importer to assume the mark was applied or used with the consent of the registered owner, an authorized user (e.g. a licensee) or a person otherwise permitted to use the trademark (e.g. a manufacturer).

The Trade Marks Act also makes it clear that consent to apply the trademark to goods can be found, irrespective of whether:

  • the consent is conditional (e.g. products are made available for sale in a foreign market only), or can be reasonably inferred from the conduct of the person providing the consent;
  • it arose directly or indirectly; or
  • it arose by way of proprietary interest, contract, arrangement, understanding, a combination of those things, or otherwise.

The way forward

Notwithstanding this, brand owners can still take action against counterfeiters for trademark infringement, and parallel importers by other means, including but not limited to:

  • trademark infringement around the parallel importation − (e.g. use of registered trademarks on social media, websites, or flyers);
  • infringement of other intellectual property rights − (e.g. unauthorized reproduction of photographs from a brand owner's website that are protected under copyright law);
  • false, misleading and deceptive representations under the Australian Consumer Law − (e.g. for creating a false impression that the parallel importer is an authorized distributor or re-seller of the brand owner's products); and
  • ensuring manufacturing or distribution agreements contemplate unauthorized distribution or sale of the brand owner's products (other than by way of trademark license), tracing the source of the unauthorized distribution and enforcing contractual obligations against the party in breach.

Return to Law à la Mode: Issue 28