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Clearing the smoke – use and consent clarified

Clearing the smoke – use and consent clarified

Published on July 29, 2016 by Patricia Monemvasitis and Kim Leontiev

The decision of the Full Federal Court in Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2016] FCFC 91 (24 June 2016) (STG v Trojan) has provided some useful clarity to the conceptual complexities surrounding use and consent under Sections 120 and 123 of the Trade Marks Act 1995 (Cth) (“TMA” or “the Act”).

The decision deals with the technicalities of the concept of “use as a trade mark” in relation to importation and resale of trade-marked goods as well as the question of whether repackaging or reapplication of trade-marks on goods prior to re-sale extinguishes the defence of “consent” available to importers and re-sellers under Section 123 of the Trade Marks Act.

Dismissing the appeal and agreeing with the primary decision of Allsop CJ, the Full Federal Court confirmed that where goods are sold or resold under a trade mark which was not applied to the goods (including packaging and other ancillary or promotional materials) by the registered owner, the importer, seller or reseller will be considered to be using the trade mark for the purposes of an infringement action under Section 120 TMA. The Court however also confirmed that Section 123 TMA will provide a defence to an infringement action where the above use of the trade mark can be said to be “use” with the consent of the registered owner of that trade mark.

Issues on appeal

The contention between the parties concerned two main issues:

  1. Did Trojan’s conduct at any stage in its operations use the STG’s trade marks within the meaning of Section 120 TMA?
  2. And, if Trojan’s conduct did amount to use, was that use of the trade marks with consent of STG within the scope of Section 123 TMA?

Background

The appeal was brought by Scandinavian Tobacco Group Eersel (“STG”), a large manufacturer of tobacco and cigars, and the registered trade mark owner of a number of famous cigar brand name trade marks including: “Café Crème”, “La Paz”, and “Henri Wintermans”. The respondent, Trojan Trading Company Pty Ltd (“Trojan”), is an importer and supplier of cigars and tobacco products Trojan acquired STG cigar products in Europe and imported and sold them in Australia. With the introduction of the Australian Tobacco Plain Packaging Act 2011 (Cth) (“TPPA”), Trojan could no longer simply import the cigar products from Europe in their original packaging which would contravene the TPPA. As such, Trojan had to repackage the cigar products into packaging that would comply with the TPPA before it could legally sell the products in Australia. STG claimed that Trojan’s repackaging of its cigar product and further sale of the repackaged products was an infringement of its registered trade marks which were displayed in plain text on the repackaging.

Use of the trade marks

Section 120 provides that:

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. (emphasis added)

The phrase “use as a trade mark” however has been significantly interpreted by the courts which have pointed to the importance of context in determining whether a particular use is “use as a trade mark” or not.[1] In the present appeal, the Full Federal Court grappled (amongst other things) with two competing strains of jurisprudence on “use by importation” flowing from the decisions in of Rothmans[2] and Estex[3].

In Rothmans the Court rejected the argument by the trade mark owner that importation of its trade marked goods into Australia by overseas purchasers constituted use of the trade mark. It was held that as the goods were imported for consumption (and not for sale) there was no “use” and that even if the goods had been imported for resale, that would have been use but not use by the registered owner, but rather (infringing) use by the importer. Estex on the other hand has been described as authority for the proposition that: there will be use of a trade mark in Australia by the registered owner if the registered owner sells the trade marked goods to Australian retailers for import and sale in Australia.

As observed by the Court in this appeal, the case law gives rise to a somewhat difficult conceptual position whereby:

a reseller of goods to which the trade mark owner has applied its mark does not use the mark, whereas a reseller of goods who has acquired goods from a third party who has applied a trade mark to the goods without the trade mark owner’s consent does use the trade mark

The conceptual difficulty here being that identical acts of a reseller can in one instance be use of a trade mark and in another instance not use of a trade mark all depending on who applied the trade mark to the goods (and if there was consent to this application from the registered owner of the trade mark to the application of the trade mark on the goods).

Despite, this conceptual tension, the Full Federal Court endorsed the position explaining it on policy grounds –principally that it is a protection of parallel imports (genuine goods imported from overseas other than by the registered trade mark owner or its direct distributors) as opposed to imports of non-genuine goods where the trade mark is applied by a third party without the registered owner’s consent.

Applying these principles to the present case, Trojan’s repackaging of the products and reselling the repackaged goods was used for the purposes of Section 120 TMA given that the trade marks on the repackaging were not applied by the registered trade mark owner (STG) or with its consent.

Consent

Having found that Trojan’s conduct was “use” of the trade marks for the purposes of infringement under Section 120 TMA, the Court had to consider the second issue: did Section 123 TMA apply to make the use of the trade mark a use with the consent of the registered proprietor of the mark.

Section 123(1) provides that:

in spite of Section 120, a person who uses a registered trade mark in relation to goods that are similar to the 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 owner of the trade mark.

The Court identified that two competing interpretations of this provision:

  1. That Section 123(1) requires that the use of trade mark occur in relation to goods which continue to bear the trade mark that was applied by or with the consent of the registered trade mark owner; and
  2. Section 123(1) is directed to any prior application of the trade mark on or in relation to the goods that occurred by or with the consent of the registered owner. This would include an application of a mark to goods by or with the consent of the registered owner where the trade mark was later removed from the goods.

The Court opted for the second interpretation which was advanced by Trojan and had been previously adopted by the primary judge. In its reasoning the Court noted there is nothing in Section 123(1) which either expressly or impliedly limits it to situations of the goods having to still bear the trade mark as applied by the registered owner. In other words, Section 123(1) only requires that the goods have at some time in the past had the trade mark applied by or with the consent of the registered owner. If this has occurred, later use of the trade mark on those same goods in the same manner as previously used by the registered owner will engage Section 123(1) in defence of the subsequent user of the trade mark.

Resisting this interpretation, STG submitted that it could lead purchasers of Trojan’s repacked goods to falsely assume that STG was responsible for the product packaging and that it had either applied or consented to the application of the registered trade marks on that packaging (when it had not). STG further submitted that allowing this unauthorised repackaging could damage goodwill associated with the trade mark if resellers could remove and (re)apply the trade mark.

These submissions were rejected given that they are properly addressed by the law of passing off and consumer law protections (which would permit the registered owner of the trade mark to sue for any adverse effects arising from the repackaging of the goods). The Trade Marks Act at Section 121 also allows trade mark owners to display a notice prohibiting certain acts in relation to the goods including prohibited acts such as applying the trade mark to goods or using the trade mark in physical relation to goods after the packaging in which the goods were originally offered had been altered.

The Court thus upheld the primary judge’s interpretation of Section 123(1), noting that the critical point remains whether the trade mark has been previously applied to the goods by, or with, the consent of the registered trade mark owner.

Implications

Most directly, the decision safeguards importers and resellers from trade mark liability based on seeking compliance with legislative requirements such as the Tobacco Plain Packaging Act. The interpretations of Section 120 and Section 123 however take the decision even further. The decision emphasises the significance of the application of the trade mark to the goods by or with consent of the registered owner (as opposed to application by a third party or the importer/reseller themselves without the registered owner’s consent). Where this occurs, the importation and/or resale of the goods will not constitute “use” within the meaning of Section 120.

Further, where subsequently the importer/reseller removes and/or (re)applies the trade mark in a manner that does not dilute the trade mark or cause deception, the defence of Section 123(1) will be available against an infringement action. Conversely, where “use” is found due to the application of the trade mark by a third party without the registered owner’s consent, the act of importation and/or resale will be considered to be a “use” for the purposes of Section 120. Subsequent removal and (re)application of the trade mark will then not be protected by Section 123(1) since there was not original application of the trade mark to the goods by the registered owner so as to create the temporal consent argument successfully relied on by Trojan in these proceedings.


[1] Shell Co of Australia Ltd v Esso Standard Oil (Australia) Ltd (1963) 109 CLR 407 (per Kitto J) (“Shell Co”)

[2] WD & HO Wills (Australia) Ltd v Rothmans (1956) 94 CLR 182 (Rothmans)

[3] Estex Clothing Manufacturers Pty Ltd v Ellis and Goldstein Limited (1967) 116 CLR 254 (Estex)

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