Repackaging into tobacco plain packaging is still parallel importing

The Full Court has dismissed Scandinavian Tobacco’s appeal from Allsop CJ’s ruling that Trojan’s repackaging of various genuine cigar products into conformity with Australia’s plain packaging laws is legitimate.

Scandinavian Tobacco is the owner, amongst other things, of the Henri Wintermans, La Paz and Cafe Creme cigar brands. Trojan bought genuine products in Scandinavian Tobacco’s genuine packaging overseas. As that genuine packaging did not comply with Australia’s tobacco plain packaging laws, Trojan removed that packaging and replaced it with packaging that did conform. Amongst other things, this involved Trojan placing The relevant trade mark – Henri Winterman, La Paz or Cafe Creme – on the packaging in the font style and size permitted under the legislation.

The Full Court considered that Trojan was using the Scandinavian Tobacco trade marks as trade marks within the meaning of s 120 by importing and offering the repackaged goods for sale. So Trojan would infringe if the s 123 defence did not apply. However, the s 123 defence did apply.

Use as a trade mark

Case law in the 1930s had established that using a trade mark in relation to goods to which the trade mark owner had applied the goods was not infringing use of the trade mark. So there was no infringement of CHAMPAGNE HEIDSIECK to import and sell genuine products marked CHAMPAGNE HEIDSIECK by the trade mark owner – even if they were a different quality to those put on the market within the jurisdiction by the trade mark owner.[1] Similarly, there was no infringement to use the trade mark YEAST VITE in the expression “YEAST TABLETS a substitute for YEAST-VITE”.[2] Numerous decisions of Australian courts under the 1955 Act proceeded on that basis.

The Scandinavian Tobacco Full Court agreed with four previous Full Courts that the introduction of s 123 into the 1995 Act – there having been no counterpart in the 1955 Act – has led to a change in the law. At [56], their Honours ruled:

In our opinion, under the provisions of the 1995 Act, a person who, in the course of trade, imports and sells goods to which a registered mark was applied by its owner at the time of manufacture will have used the mark as a trade mark. It follows that, on this issue, we are not satisfied that the position under the 1995 Act is other than as stated in Montana, Gallo, Sporte Leisure and Lonsdale.

As their Honours explained at [58]:

Section 123 of the 1995 Act gives the Champagne Heidsieck principle an express statutory footing that, in our view, leaves no scope for the principle to be given any more expansive operation by reference to cases decided under different legislation including Champagne Heidsieck itself: see Sporte Leisure at [71] and Lonsdale at [62]-[63] where reference is made to the difficulties involved, as a matter of statutory construction, in attributing to the Champagne Heidsieck principle a broader operation that travels beyond the scope of s 123. Under the 1995 Act, the question of whether or not a registered mark is infringed by the commercial importation or sale of genuine goods (what Clauson J described as “those upon which the plaintiff’s mark is properly used”) must now be determined by reference to s 123(1). If the respondent who is selling what are said to be genuine goods is held to be outside the protection of s 123(1), then the respondent will not avoid liability for trade mark infringement on the basis that he or she is not using the relevant mark unless there is something else about the context in which the use occurs that (as in Wingate) might lead to a different conclusion.

The Scandinavian Tobacco Full Court noted that was the way the English Court of Appeal in Revlon v Cripps and Lee Ltd had treated the introduction of a counterpart “consent” defence into the UK Trade Marks Act.

The Scandinavian Tobacco Full Court perceived a lack of enthusiasm for the “old” cases in the High Court’s decisions, such as Gallo, under the 1995 Act. In addition, their Honours noted their conclusions was consistent with the position expressed by Aickin J, sitting alone, in the Pioneer case:

Thus if Pioneer Australia had done no more than import the goods and sell them by retail it would have used the mark, but in fact it did much more as the evidence referred to above demonstrates.

There is no doubt that the Pioneer ruling was a landmark decision in Australia accepting the validity of trade mark licensing. For many years, however, Aickin J’s acceptance that a trade mark could be validly used to denote source in both the trade mark owner and one or more authorised users, rather than the trade mark owner alone, was considered rather problematical, albeit arguably contemplated by the definition of a trade mark under the 1955 Act[3]. That Janus-like approach appears very difficult to maintain in the face of the definitions in s 7 and s 8 of the 1995 Act.

Their Honours also noted the problems that defendants might have, bearing in mind the onus of proving the elements of the defence. However, they considered that the evidential burden could shift quickly as the trade mark owner would usually ve best placed to give the relevant evidence.

The s 123 defence

The Full Court upheld Allsop CJ’s ruling that the s 123 defence applied. Section 123(1) provides:

(1) In spite of section 120, a person who uses a registered trade mark in relation to goods that are similar to goods in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied to, or in relation to, the goods by, or with the consent of, the registered owner of the trade mark.

The repackaged cigars were goods which ST itself had applied its trade marks to, or in relation to. So the requirements of s 123 were literally satisfied. ST argued, however, that s 123 applied only in relation to goods while the trade mark owner’s trade mark was actually applied to them. Once it was removed (such as by repackaging), therefore, s 123 had no operation.

The Full Court, however, pointed out that a trade mark owner could legitimately use its trade mark in relation to goods and did not necessarily have to apply the trade mark actually to the goods. Examples of this could be use of the trade mark on an advertisement or a document, rather than on the goods themselves. The Full Court held, therefore, that there was no express or implied limitation in the words of s 123. The temporal requirement in s 123 would be satisifed if at some point before the alleged infringer used the trade mark the trade mark owner (or someone with the trade mark owner’s consent) applied the trade mark to the goods or used it in relation to them. At [65], their Honours explained:

The language of s 123(1) refers to a mark that has been applied to or in relation to goods by or with the consent of the registered owner. The operation of the section is not expressly or impliedly confined to a situation in which the goods still bear the mark as applied by the owner. The temporal requirement of the section will be satisfied if at some time in the past, which may be after the time of manufacture, the mark has been applied to or in relation to goods by or with the consent of the owner. If those goods are later sold by a person in circumstances which involve him or her using a mark that was previously applied by or in relation to the goods by the owner then s 123(1) will be engaged.

Section 123 did not provide a defence to the type of infringement prescribed by s 121.[4] Therefore, the words of s 123 were not to be read down by reference to s 121.

The Full Court considered that Scandinavian Tobacco’s concerns that its goodwill may be harmed by Trojan’s repackaging exercise were not matters falling for consideration under the terms of s 123. Rather, such issues would need to be addressed through passing off and the consumer protection laws.

Passing off

The claim in passing off (and under s 18 of the ACL), however, also failed. The trial judge had found the repackaging did not misrepresent that Scandinavian Tobacco had repackaged, or authorised the repackaging of, the cigars. In this respect, Scandinavian Tobacco’s own evidence was unhelpful as it appears that Scandinavian Tobacco Australia itself had engaged in repackaging other brands of cigars for which it was not an authorised distributor.

Wrap up

I think this is the first case since Montana that has gone to trial which the parallel importer has won. Then again it is also the first case since Montana that actually involved parallel imports.

The Full Court’s interpretation of s 123 is at least straightforward and avoids the complicated notice procedure applying in the EU. The “new”[5] concept of use as a trade mark apparently introduced by the 1995 Act will mean some careful thought needs to be given to “old” cases on what constitutes trade mark use, unless the High Court becomes motivated to revisit the reservation left open in [33] and [34] of the Gallo decision. It will interesting to see if trade mark owners start to explore the use of conditions under s 121 or are willing to assign the Australian trade marks as in Montana in attempting to circumvent the operation of s 123.

Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2016] FCAFC 91


  1. Champagne Heisieck et cie Monopole SA v Buxton [1930] 1 Ch 330.  ?
  2. Irving’s Yeast-Vite Ltd v FA Horsenail (1934) 51 RPC 110 (HL), a decision adopted and applied by the High Court in, for example, the [Tub Happy][tub] case.  ?
  3. That definition referred to a mark used so as to “indicate a connexion in the course of trade between the goods and a person who has the right, either as proprietor or as registered user, to use the mark, whether with or without an indication of the identity of that person”.  ?
  4. Section 121 empowers the trade mark owner to impose condition which may run with the goods to prevent those subsequently acquiring them from doing acts in breach of the conditions.  ?
  5. Bearing in mind this is the fifth Full Court decision adopting this position.  ?

Australia Wins Philip Morris’ Challenge Against tobacco plain packaging

The IPkat reports that Australia has won the claim Philip Morris brought against the Tobacco Plain Packaging laws under the investor dispute resolution clause of the Australia – Hong Kong Business Investment Treaty.

As the IPkat’s report notes, the dispute resolution panels under the WTO are still in train.

Plain Packaging: WTO dispute panel appointed

Five countries have brought WTO Complaints against Australia’s plain packaging rules for tobacco products.

On 25 April 2014[1], the Dispute Settlement Body under the Dispute Settlement Understanding established panels to determine the complaints brought by Cuba, the Dominican Republic, the Ukraine, Honduras and Indonesia.

On 5 May[2], the Director-General formally announced the 3 member Panel who will hear the disputes:

In addition to the 5 complainants, some 25 other polities have “reserved their third party rights”:

Argentina, Brazil, Canada, Chile, China, the European Union, Guatemala, India, Japan, Korea, Malaysia, Mexico, New Zealand, Nicaragua, Norway, Philippines, the Russian Federation, Singapore, Chinese Taipei, Thailand, Trinidad & Tobago, Turkey, the United States, Uruguay and Zimbabwe

Typically, there should be a decision within 6 months (but there is also an appeal process). Typical timeline


  1. Not sure if that is an auspice.  ?
  2. Another date freighted with history.  ?

Tobacco Plain Packaging reasons

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

Another round in the plain packaging tobacco war

This is a bit behind as it happened over the break:

The “tobacco plain packaging” legislation became law last December and, as you will recall, Philip Morris Asia has initiated an arbitration proceeding under the Australia-Hong Kong Investment Treaty.

Australia filed its “defence” late in December, alleging that Philip Morris Asia bought the assets in question after the Government’s plans were known and so hasn’t lost any value:

Prof. Davison has a typically wry report

Philip Morris’ complaint and Australia’s “defence” are available via here.

 

Senate sends tobacco bill to Committee

The Senate has referred the Trade Marks Amendment (Tobacco Plain Packaging) Bill 2011 to the Legal and Constitutional Affairs committee.

This bill would give the Government power to “fix” gaps in the Tobacco (Plain Packaging) Bill by simply making regulations. The House of Representatives Health and Ageing committee has recommended the bill be passed.

The Committee is due to report by 2 September with the Committee’s report due by 19 September.

House committee recommends Parliament pass the tobacco plain packaging legislation

In a report tabled today (pdf), the House of Representatives’ Health and Ageing committee has recommended that the House pass the tobacco plain packaging legislation.

The Committee noted the submissions about possible breaches of TRIPS, the Paris Convention, the Constitution etc. and said at [1.63]:

While the Committee recognises that there are … complex legal issues relating intellectual property and trade marks, it considers these issues to be beyond the purview of a Committee formed to consider matters directly related to health and/or ageing. Therefore the Committee has decided to confine its comments to evidence relating to health implications of the legislation. ….

Link to html links

Phillip Morris sues Australia!

Phillip Morris has announced that it plans to sue Australia under the Australia-Hong Kong (SA) Bilateral Investment Treaty over the planned plain packaging legislation.

What the Government is proposing to do

Under the proposed Tobacco Plain Packaging Bill 2011, tobacco companies would be required to adopt a prescribed form of packaging for tobacco products.

In its most recent form, this would involve all tobacco companies using the same olive brown colour for their packaging with large, graphic images and health warnings. Some illustrations here. The contemplated regulations would limit brand names to be positioned on the top, bottom and a designated position on the front of the box in Lucida sans serif font, point size 14. (See pp. 12 and 13 of the Consultation Paper (pdf).

The trade mark lawyers amongst us will notice that clause 15 of the proposed bill will preclude a registered trade mark from being removed for non-use resulting from the strictures imposed by the proposed legislation.

The announced intention is for the laws to come into full operation on 1 July 2012. The proposal is only in exposure draft form at this stage, with public comment being scheduled to have closed by 6 June. However, the Opposition has apparently indicated its support for the Government’s position.

What Phillip Morris claims

If you read a newspaper in Australia, you can hardly have failed to notice the advertisements taken out by the tobacco companies violently opposed to this plan. There is also a website.

Phillip Morris has taken matters a step further and lodged a notice of claim against Australia under the Australia-Hong Kong (SAR) Bilateral Investment Treaty.

Unlike Free Trade Agreements and WTO / TRIPS, apparently, companies can bring claims against a party (alleged) to be in breach of its treaty obligations, not just another country party.

It would appear that Phillip Morris is not just after compensation but also an order requiring Australia to suspend operation of the law.

Details about the basis of Phillip Morris’ claim are sketchy at this stage. According to Phillip Morris’ own News Release:

“The forced removal of trade marks and other valuable intellectual property is a clear violation of the terms of the bilateral investment treaty between Australia and Hong Kong. We believe we have a very strong legal case and will be seeking significant financial compensation for the damage to our business”.

The speculation is that Phillip Morris will argue that the proposed law is an expropriation of Phillip Morris’ investments (trade mark rights) without fair compensation: see Article 6.

According to its Press Release, Phillip Morris has apparently garnered support from an eminent Georgetown professor (and Harvard graduate) for its position.

The Government has previously denied its plans will breach its international obligations.

Assoc. Prof. Jurgen Kurtz at Melbourne University has a very interesting consideration of the issues, noting that there is case law which would support the Government’s position as well as a contrary line. Prof. Rothwell from the ANU also explores the issues. He also reportedly contends that Phillip Morris may well have lodged its complaint too soon as the bill is not law yet, although, presumably, that would not preclude another complaint at a later stage.

The News Release also indicates that a period of 3 months’ negotiating follows before an arbitration proceeding is implemented under the Arbitration Rules of the United Nations Commission on International Trade Law 2010. The process will not be a short one!

Tobacco and trade marks seminars – the video

IPRIA held a public seminar on the Commonwealth Government’s proposals to ban the use of artwork and logos on cigaratte packaging.

The video and Powerpoint packs are now online via here – Prof. Davison advises me that Videos 4 and 5 are the “legal” ones.

Tobacco and trade marks seminar

IPRIA is hosting a seminar on the Commonwealth Government’s announced intention to ban the use of artwork and logos on cigarette packaging.

Speakers:

  • Prof. Mark Davison
  • Prof. John Freebairn, a professor of economics at Melbourne Uni
  • Ass. Prof. Angela Paladino, who teaches in Marketing at Melbourne Uni (and is a recipient of over $2M in competitive funding)
  • Tim Wilson, the Director of Intellectual Property and Free Trade unit at the Institute of Public Affairs.

They threaten to “consider the economic, legal, ethical and marketing implications of this decision”. Unfortunately, there is no indication that Kev10 will be there to perform his patented double pike with backflip. However, it does seem that the Senate Committee inquiring into the bill is not due to report until 26 August 2010. (although submissions should well and truly be in by now).

Where:

Wednesday, 26 May 2010 at 6pm (Lecture Theatre GO8, Melbourne Law School)

The seminar is free and there are CPD points going.

Details and registration here.