Archive for October, 2012

Trade marks, un-parallel imports and the emerging concept of use as a trade mark

Thursday, October 18th, 2012

The Full Court has rejected another attempt by Paul’s Retail to invoke s 123 against allegations it was infringing LONSDALE trade marks.

Background

Lonsdale Sports Limited (Lonsdale UK) had a number of registered trade marks in Australia and elsewhere for LONSDALE.

In May 2008, it licensed Punch GmbH to use the LONSDALE trade marks in a number of countries, mostly in Europe. As part of the licence, Punch was permitted to get its LONSDALE goods made in China.

In June 2011, Lonsdale UK assigned its Australian trade marks to Lonsdale Australia. Both Londsdale Sports Limited and Lonsdale Australia were members of the same corporate group, having Sports Direct as their ultimate holding company.

Between December 2011 and April 2012, the appellants bought and imported into Australia 293,329 products bearing the LONSDALE trade marks. The way the goods were sourced plainly gave rise to considerable skepticism in the courts.

The goods were in fact made and marked by Punch in China. Punch sold them to Unicell. Punch invoiced Unicell and shipped them to Unicell in Sri Lanka, part of Punch’s territory, and bought them from Punch. . Unicell then engaged in ‘certain “pre-retailing” activities (such as splitting, tagging and pricing) and shipped them to the appellants via the intermediary of  TMS LLC (a US company).

Punch paid royalties to Lonsdale UK on the goods it shipped to Unicell. It appears from Gordon J’s reasons, however, that there were some differences between at least 2 of the trade marks registered in Australia and those licensed to Punch by Lonsdale UK. Although not licensed to it by Lonsdale UK, Punch nonetheless arranged to have those 2 trade marks put on the products the appellants imported and sold.

The Full Court (Keane CJ, Jagot and Yates JJ) has affirmed Gordon J’s ruling that the appellants infringed the registered trade marks in Australia for LONSDALE, but not for the reasons you, or the trial judge, might think.

The trial judge, Gordon J, held there were 3 reasons why Paul’s infringed:

32 There are three complete answers to this submission. First, for the reasons stated at [16]-[18] above, this construction of the Champagne Heidsieck principle should not be accepted. The reference to “registered owner” in the High Court’s statement of the principle should be understood to mean the registered owner of the Australian registered trade marks in question, consistently with the proper construction of the TM Act. Accordingly, the principle will only assist the respondents if they can show that Lonsdale Australia consented to the application of the Lonsdale Australia Trade Marks. Secondly, Lonsdale Australia (being the registered owner of the Lonsdale Australia Trade Marks) did not affix any mark to the Paul’s Goods. Thirdly, as stated at [27] above, it cannot be said that “a manufacturer [has put] a trade mark on his goods and [sent] them into the course of trade on the billowing ocean of trade … not telling any lies or misleading anyone in any way at all”: cf Atari 50 ALR 274 at 277. Here, the “manufacturer” of the goods (Punch) did not legitimately apply at least two of the three marks to the Paul’s Goods.

That is, Lonsdale Australia as the registered owner of the trade marks in Australia:

(1) did not apply the trade marks to the imported goods;

(2) did not consent to Punch applying the trade marks to the imported goods,

and Punch had no authority to apply at least two of the trade marks to any goods.

The Full Court – why s 123 did not apply

The Full Court, however, considered it was unnecessary to even address those questions. Instead, it said at [37]:

The consent given by [Lonsdale UK] to Punch on which the appellants rely was limited in its terms to “the non exclusive right to promote, distribute and sell Products bearing the Trade Marks in the Territory”. Whether one looks at the issue through a strict legal analysis of the Punch licence and the Punch-Unicell sales agreement, or from a broader commercial perspective, the use of the Lonsdale marks for the purposes of the sale by Punch to Unicell cannot be seen to be within the limited consent given by the Punch licence.

That is, as Punch had a licence limited only to selling LONSDALE products in Europe, s 123 was not even engaged. It was unnecessary to enquire whether the trade marks had been applied by or with the consent of the trade mark owner.

By dealing with the issue in this way, the Full Court avoided having to deal with the question (1) whether the common ownership of both Londsdale UK and Lonsdale Australia as members of the same corporate group was a sufficient basis to infer consent to the application of the LONSDALE trade marks to the goods imported by Paul’s.

Given (absent imputed consent through the corporate relationship) at least some of the trade marks applied by Punch to the Paul’s goods were not licensed to Punch by Lonsdale UK, one may wonder why the Full Court took its approach. If Punch’s licence had not been limited territorially, would the Full Court have imputed consent on the basis of the corporate relationship?

The Full Court’s approach to the scope of Punch’s consent is similar to the way the Courts deal with implied consent in the context of patents.[1] Accordingly, before one even considers whether the consent of the registered owner of the trade mark may be invoked under s 123, it will be necessary for a prospective parallel importer to ascertain the scope of the licence given to the licensee from whom the goods are sourced.

That this is a deliberate choice by the Full Court is reinforced by the Court’s express denial at [51] of any relevance to the interpretation of s 123 by reference to the doctrine of exhaustion. That rejection may be thought somewhat surprising as s 123 was enacted to implement the recommendation of the Working Party to give statutory force to the doctrine of exhaustion:

A majority of the comments received were in favour of the exhaustion of rights doctrine.. Questions were raised as to whether or not the mark was applied with or without the consent of the proprietor and whether the goods were materially different form the local goods. It was considered preferable that argument on these issues take place in the context of statutory recognisiton of the legality of parallel importation.

The Champagne Heidsieck principle

The Full Court also rejected the appellants’ attempted reliance on the so-called Champagne Heidsieck[2] principle. As re-formulated by the High Court in Gallo at [34]:

a trade mark is not infringed by a third party importing, offering for sale and selling, without the owner’s consent, goods to which the registered owner (or its licensee) has affixed the mark….

Gordon J’s reasoning at first instance avoided this principle since the registered owner, Lonsdale Australia, had never consented to anything Punch did or arranged.

Having noted there were difficulties in articulating how the Champagne Heidsieck[2] principle could apply in the context of the Act and particularly s 123, the Full Court at [64] considered that, if s 123 did not save the appellants, there was no other principle that could help them. However, the Full Court went on to reject the argument that:

the importation and sale of goods marked with the consent of the owner of the trade mark or its licensee does not involve a use of the trade mark by the importer or seller.

The Full Court rejected this argument at [65]:

If this argument were correct, an importer would not infringe the trade mark merely by acts of importation and sale even if the mark had been applied to the goods without the consent of the owner of the trade mark. This Court has previously expressed the view that “…absent s 123 the mere sale by an importer of goods already marked would be an infringing use of the mark by the importer”: See E & J Gallo Winery v Lion Nathan Australia Pty Ltd (2009) 175 FCR 386 at [58]; quoted in Paul’s Retail Pty Ltd v Sporte Leisure Pty Ltd (2012) 202 FCR 286 at [66]; see also Transport Tyre Sales at [94].[3]

Although the Full Court appears to treat this part of the appellants’ argument separately to the Champagne Heidsieck[2] principle, it is with respect difficult to see any difference between the two arguments.

It could be argued that the situation addressed by the Champagne Heidsieck principle is very different to that where the goods imported are not genuine. As the Full Court noted at [66], however, support for the view taken by, now, 3 Full Courts can be found in the observation of Aickin J in Pioneer,  which itself seems difficult to reconcile with s 7(3).

It therefore appears clear, failing intervention by the High Court, that the Champagne Heidsieck[2] principle is no longer applicable in Australian law.

One consequence of this appears to be that a provision intended to entrench the rights of parallel importers may well have made it much more difficult to engage in parallel importing.

More importantly, the Champagne Heidsieck[2] principle can be seen as an emanation of what US trade mark lawyers call “nominative use” or “nominative fair use”: one did not use a trade mark as a trade mark by using it to identify the goods or services marked with the trade mark by the trade mark owner. So, for example, under the old Act the Full Court held it was not use the trade mark ROLLING STONES as a trade mark to sell bootleg recordings of the Rolling Stones performing by reference to the name ROLLING STONES. Does the enactment of s 123 mean that principle is no longer applicable?

Paul’s Retail Pty Ltd v Lonsdale Australia Limited [2012] FCAFC 130


  1. Société Anonyme des Manujactures de Glaces v. Tilghman’s Patent Sand Blast Company (1883) 25 Ch. D 1 (CA).  ?
  2. Champagne Heidsieck et Cie Monopole Societe Anonyme v Buxton [1930] 1 Ch 330.  ?
  3. In Gallo, the High Court had refrained at [53] from expressing a view about the correctness of this view.  ?

Access to affordable medicines or new review of pharmaceutical patents

Wednesday, October 17th, 2012

The Parliamentary Secretary for Industry and Innovation, Mark Dreyfus, has appointed a panel to review the patenting of pharmaceuticals in Australia.

According to the Terms of Reference, the review:

will evaluate whether the system for pharmaceutical patents is effectively balancing the objectives of securing timely access to competitively priced pharmaceuticals, fostering innovation and supporting employment in research and industry.

Central to this will be an analysis of the pharmaceutical extension of term provisions of the Patents Act 1990 (s.70).

The review will also consider whether there is evidence that the patent system is being used to extend pharmaceutical monopolies at the expense of new market entrants. In doing this, the review will consider how patents for new formulations are granted, consider the treatment of new methods of manufacturing and new uses of known products, the impact of contributory infringement provisions and the impacts of extending patent monopolies on entry of generic pharmaceuticals into the market.

The panel consists of 3 members:

  •  Mr Tony Harris, former NSW Auditor-General and Parliamentary Budget Officer, as Chair
  • Professor Dianne Nicol, Associate Dean, Research, of the University of Tasmania, and
  • Dr Nicholas Gruen, CEO of Lateral Economics.

A public consultation process will form part of the review which appears to include consultation with stakeholders and an opportunity for public submissions.

According to the press announcement, the panel is due to submit its final report by April 2013.

Of course, there is already a review of compulsory licensing under way following the BRCA controversy. I do not know if it is related to this review or not, but back in May, Senator Heffernan questioned the Director-General of IP Australia about what steps the Government may have been taking to recover payments under the Pharmaceutical Benefits Scheme to pharmaceutical companies for patents subsequently found invalid. The Senator alleged that the sums involved amounted to hundreds of millions of dollars. The Director-General referred the Senator to the Department of Health and Aging, which has responsibility for these matters.

Raising the bar reg.s 2.2

Monday, October 15th, 2012

Dr Summerfield has updated his marked up version of the reg.s to reflect the second tranche of the exposure draft regulations, here.

He also draws attention to the shortening time frames the exposure draft regulations will introduce.

You still need to get your comments in by 21 November 2012.

2nd tranche of Raising the Bar draft regulations

Thursday, October 11th, 2012

IP Australia today released the second tranche of exposure draft regulations implementing the Intellectual Property Laws Amendment (Raising the Bar) Act 2012.

This tranche deals with schedule 3 (reducing delays in resolving patent and trade mark applications) and schedule 6 (simplifying the IP system).

Comments still need to be submitted by 21 November 2012.

Go here, and scroll down (past the first tranche if you already have them).

Dr Summerfield prepared a marked up version of the regs as the first tranche would amend them and discussed the new search fee implications.

Tobacco Plain Packaging reasons

Friday, October 5th, 2012

Having previously announced the conclusion that the Tobacco Plain Packaging laws were valid, today the High Court published their reasons.

6 of the judges, Heydon J dissenting, ruled that s 51(xxxi) did not apply because there was no “acquisition” of the tobacco companies’ intellectual property rights. It was true that the ability, or rights, of the tobacco companies to use their intellectual property rights was severely curtailed, if not extinguished. That was insufficient to constitute an acquisition in itself. But, the Tobacco Plain Packaging legislation did not appropriate those rights for use by the Commonwealth.

As a result, it was unnecessary to consider the Commonwealth’s further argument that, if there were an acquisition, it was justified and reasonable in the circumstances.

JT International SA v Commonwealth of Australia [2012] HCA 43

Patents, copyright and competition

Wednesday, October 3rd, 2012

Judge Posner, one of the authors of the leading modern text on the economics of intellectual property (amongst many other things), has published a controversial blog post questioning whether patents and copyright law, but particularly patents, are granting excessive protection.

Judge Posner accepts that patents for pharmaceuticals are the “poster child for patent protection”, but contrasts that to patents for computer software.

The IPKat explores some aspects of this part of Judge Posner’s critique.

In his judicial capacity, Judge Posner recently dismissed both Apple’s and Motorola Mobility’s attempts to use their respective patent portfolios to extract injunctions and damages from the other (pdf of the Opinion).

On copyright, Judge Posner is particularly concerned about the term of protection: currently (i.e., until Mickey Mouse next nears expiry) 70 years after the death of the author(s) for published works and the very restrictive approach to “fair use”. Amongst other things, Judge Posner refers to the music companies’ practice of requiring licences for “samples”.

Wonder what he would make of the Kookaburra that scotched Men at Work?

The 1709 blog delves into this part of his Honour’s views.

Copyright walkabout

Tuesday, October 2nd, 2012

I am present IPSANZ annual copyright update for 2012:

  • in Brisbane at Corrs Chambers Westgarth’s offices on 9 October; and
  • in Melbourne at the RACV Club on 18 October.

Details via the links above.