Parallel Importing into Australia: Opportunity or Threat?

 

28 May 2018
Posted by Omid Komeili

What are parallel imports?

Although not defined in Australian legislation, parallel importing, sometimes known as grey importing, takes place when a person (Importer) imports goods into Australia via a distribution channel other than the formal distribution channel for those goods. Purchasing goods via a formal distribution channel often includes purchasing the goods from an authorised dealer in Australia or directly from the manufacturer.

Parallel importing is divisive because:

– Australian consumers benefit from the increase in competition for those goods, partly as a result of the cheaper cost price of the goods to the Importer; and
– registered owners of trade marks in Australia may suffer from a loss in revenue and/or profit due to losing sales of their goods to new competitors in the Australian market and/or decreasing the prices of their own goods in response to the increase in competition.

The current law

Section 120 of the Trade Marks Act 1995 (Cth) (Act) states the following:

A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered.

An example of trade mark infringement under this section would be an Importer importing goods, such as cosmetics goods, marked with a brand name or logo that is also a registered trade mark in Australia, owned by a person other than the Importer and where that registration is for the same or similar goods to those goods being imported.

However, section 123(1) of the Act states that this will not be trade mark infringement if the trade mark has been applied to the goods by, or with the consent of, the registered owner of the trade mark in Australia.

The courts have interpreted section 123(1) narrowly, permitting registered owners of trade marks to utilise complex corporate structures and contractual licensing terms to limit the likelihood of a court finding that the trade mark was applied to the goods by, or with the consent of, the registered owner of the trade mark in circumstances where those goods are parallel imported into Australia. For example, a company may enter into agreements that purport to limit the territory in which each distributor of its goods is permitted to supply those goods in, therefore, limiting the registered owner’s consent to apply to that territory only.

Proposed amendments to the law

Following the Productivity Commission’s recommendations, the Turnbull Government has introduced the Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Bill 2018 (Cth) (Bill).

Clause 122A of the Bill states that a person does not infringe a registered trade mark if:

– before the time of use, such as before importing goods with that trade mark applied to them, the person had made reasonable inquiries in relation to the trade mark; and
– at the time of use, such as at the time of importing the goods, a reasonable person, after making those inquiries, would have concluded that the trade mark had been applied to, or in relation to, the goods by, or with the consent of, a relevant person.

‘Relevant person’ means: the registered owner of the trade mark; the authorised user of the trade mark; a person permitted to use the trade mark by the registered owner; a person with significant influence over the use of the trade mark by the registered owner or authorised user; or an associated entity of any of the previous mentioned entities.

The introduction of clause 122A poses a threat to registered owners of trade marks in Australia and provides significant opportunities for Importers, particularly in the FMCG industry, to consider utilising more cost-effective supply chains.

These proposed changes to the Act seek to implement the Turnbull Government’s policy on parallel importing and, ultimately, benefit Australian consumers. This purpose is reinforced in the Bill’s Explanatory Memorandum:

The amendments are intended to ensure section 123 and related provisions of the Trade Marks Act better meet the objective of facilitating the parallel importation of goods into Australia to the benefit of consumers by limiting the strategic use of restrictions by registered trade mark owners. The amendments also introduce greater clarity and certainty in how the provisions operate.

If you are intending to parallel import goods into Australia or you are a registered owner of a trade mark, our lawyers can assist you with your intellectual property, trade and regulatory concerns.  Please email us at hello@studiolegal.com.au, or call us on 03 9521 2128.

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