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Parallel Imports and Intellectual Property

Internet Shopping – Parallel Imports and Intellectual Property


It often feels that intellectual property (IP) laws have been designed to thwart our natural rights to consume. Not evil counterfeit goods, but rather the right to consume genuine goods when we want them and at reasonable prices.

Just how freely can goods flow into Australia in a world shrunk by the internet?

The territorial nature of IP rights has been, and to a certain extent can be, magnificent from the perspective of an IP owner. IP owners have traditionally been able to control (or some might say manipulate) the various geographical markets in which their products were sold.

We have always been generally aware, but with a few clicks of the transparency equaliser internet machine, it is now depressingly clear that Australian consumers do pay a lot more for goods than consumers in many other countries.

Price aside, the internet is a remarkably efficient channel to purchase goods. The long list of benefits include choice, lower search costs, convenience, detailed product information, superior service or the simple fact that you are finally able to purchase goods which are not otherwise within your physical reach.

Local is of course wonderful but many online retail communities are thriving with members opining, contributing and generally feeling happily connected to the products they love and their tribe. Truly well informed customers and no snooty sales staff to contend with.

It is bewildering that goods (including some Australian brand goods) can be purchased and delivered to Sydney from foreign locations such as the USA or the UK faster and at less cost than from traders in Sydney or other Australian locations.

In purchasing these goods from foreign websites, we are importers, indeed we are parallel importers.

Individual shoppers are generally not the focus of an IP dispute. Australian law provides that a person infringes a registered trade mark if they use the trade mark as a trade mark in the course of trade in Australia. A person who imports goods for their own personal use will not infringe the registration because they will not be using the trade mark in the course of trade. The issue in most disputes involving parallel imports is the liability of the trader who supplies the Australian consumer and / or the person who imports commercial quantities.

Notwithstanding the empowering aspects of internet shopping, there are some compelling arguments against parallel imports. Consumers may lose in the form of after sales service and warranties. The appointed exclusive distributor also deserves some sympathy given that traders who engage in parallel imports often reap the benefits of the distributor’s efforts and expenditure in promoting the goods in the particular market.

Parallel imports have been increasingly hard to control as Australia has endorsed the doctrine of exhaustion of rights whereby the trade mark owner’s rights to control the goods are exhausted once the goods are put onto the market place.

Section 123 of the Trade Marks Act 1995 (Cth) provides that use of a trade mark, in relation to goods or services in which the trade mark is registered, will not constitute an infringement, provided the trade mark was applied by, or with the consent of, the registered trade mark owner.

Two recent decisions confirm that there is scope for to prevent parallel imports into Australia, such that importers need to carefully consider the position.

Lonsdale Australia Limited v Paul’s Retail Pty Ltd & Anor [2012] FCA 584 establishes that importers bear the onus of proof where they assert that the registered trade mark owner has consented to the use of the trade marks. The decision provides some guidance on what may constitute consent.

In Paul’s Retail Pty Ltd v Sporte Leisure Pty Ltd [2012] FCAFC 51, the Full Court of the Federal Court of Australia has confirmed that a license to use a registered trade mark within a territory does not include a right to apply that mark to goods which, the licensee knows at the time it applies the mark, are to be supplied outside that territory. Again there was no consent.

Brand owners should ensure that they have well drafted agreements in place and to achieve the best position from an international perspective.

As outlined, traders importing in commercial quantities have usually been the target of claims of unlawful parallel imports. Interestingly, the general public’s embrace of internet shopping has become public enemy number one. Bricks-and-mortar retailers have been fighting back against individual online shoppers with non-IP related weaponry including calls to reform GST, try on charges for ski boots, shoes and clothing.

More recently, initiatives (see Door Closing) have included negotiated restrictions on foreign internet retailers selling to Australian consumers, as well as negotiating set prices and limit supply.

Hmmm….Did someone say price-setting? Did someone say try on?

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Lance Scott is an IP Lawyer and TradeMark Attorney at 1Place Patent Attorneys + Solicitors


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