Case Studies

Fashion, Parallel Imports and Trade Mark Law – G-Star (Part II)

We recently posted an article about a fashion clothing importer who was sued for trade mark infringement by the register proprietor of the trade mark in Australia.

These types of cases often include claims for copyright infringement, breach of Australian Consumer Law (false and misleading conduct) and/or passing off. Our matter was no exception.

Statutory Defence

A registered trade mark gives the owner a monopoly to use the mark in connection with the goods or services for which it is registered. In relation to parallel importing, the Trade Marks Act provides a defence to what would otherwise constitute infringement of a registered trade mark, where the importer can show that the trade mark – usually comprised in the label and swing tags on a garment or accessory – were affixed with the consent of the owner of the trade mark (s.123 Trade Marks Act).

To obtain the protection of the defence, the importer bears the onus of proving that the goods are genuine and/or that they were manufactured with the knowledge and consent of the trade mark owner.

Although the second limb of the defence can be difficult to make out, in cases where the overseas trade mark owner (who applied, or consented to the application of the trade mark to the goods) and the Australian trade mark owner are the same, Australian courts have held that parallel importation of trade marked goods does not infringe the Australian trade mark.

G-Star On Toast

This was confirmed in a case decided by Justice Middleton in the Federal Court in Facton Ltd v Toast Sales Group Pty Ltd [2012] FCA 612.

In that case, the Applicant’s (plaintiffs) control the G-Star brand throughout the world. The First Applicant owns 11 registered trademarks in Australia relating to G-Star. Another of the Applicant’s was the exclusive licensee of the trade marks in Australia and another applicant was authorised to use the G-Star trademarks.  The Respondent (defendant) was a retailer who conducted its business by operating “pop-up” events, at which it sold a range of clothing and accessories – including G-Star. They occurred sporadically in temporary premises including hotel lobbies, conference centres and vacant retail locations. G-Star were not happy.

The Respondent (Toast) acquired its G-Star stock from a range of suppliers. They included a company which operated G-Star stores in Australia, a store in the UK which went into liquidation and a company which operated in Greece. It was not in dispute that the products which were sold were authentic G-Star products.

Toast was sued by the Applicants for trade mark infringement (s.120 Trade Marks Act) in respect of the garments sold and promotional material used to advertise them and claimed that Toast had engaged in misleading or deceptive conduct in connection with the promotion and sale of the G-Star branded products.

Without analysing the whole case and the detailed review of all the sales made, relevant to the case we acted in, it is useful to look at the impact of the purchase by Toast of G-Star stock from the UK and Greece, to see if the s.123 defence could be made out. Justice Middleton found that it could.

In relation to the stock obtained from Greece, the Applicants said that the Greek supplier was “restrained from supplying G-Star branded products to retailers outside of its business, or retailers not authorised by G-Star.” Toast kept selling and promoted its sales events referring to “GSTAR” and “G STAR” – which is not the registered trade mark, but is clearly similar.

Timing for Consent

The Applicants sought to rely on an argument that the “consent” required to invoke the operation of the s.123 defence, was a consent not just to the manufacture of the articles bearing the trade mark(s), but that the added consent to sell beyond the scope of their licence, or contract terms.

The judge referred to another case recently decided by the Federal Court of Appeal in Paul’s Retail Pty Ltd v Sporte Leisure Pty Ltd (2012) 95 IPR 151, the effect of which was to find that the correct time to determine consent, for the purpose of s.123, was at the time of manufacture. It was also held, in line with another Full Federal Court case (Transport Tyre Sales Pty Ltd v Montana Tyres Rims & Tubes Pty Ltd (1999) 93 FCR 421, that it is immaterial where the application occurs and that it is equally immaterial to inquire as to the intention of the registered owner of the trade mark with whose consent the trade mark has been applied, as to where the goods would be sold.

On that basis, Toast succeeded in its s.123 defence. The Court found that the trade mark owner provided its consent at the time of manufacture.   It was also determined that s.123 applied in respect of the use of the trade mark(s) in promotional materials in relation to goods – the use of the trade mark was incidental.

Take-Away

To do this, it essential for parallel importers to go back to those “authorised stockists” from whom it obtained the trade mark protected stock and confirm the origin of the relevant articles. It would be prudent to sight the relevant documents and obtain warranties and indemnities from the supplier in relation to “genuineness”.

For advice on trade mark law and distribution agreements contact Peter English or Anthea Eills.