Section 123 provides complete defence to alleged infringing use on promotional material


In Facton Ltd v Toast Sales Group Pty Ltd ([2012] FCA 612, June 19 2012), the Federal Court of Australia has held that Toast Sales Group Pty Ltd’s use of various G-STAR marks was in relation to genuine goods to which the marks had been applied with the relevant consent of the trademark owner, and that such consent could not subsequently be withdrawn.

The allegations of infringement arose out of 12 'pop-up' warehouse sales conducted by Toast Sales at which it sold a range of clothing and accessories, including G-STAR. Pop-up sales are sporadic events that take place at various locations, such has hotel lobbies, conference rooms or vacant retail locations. Importantly, although the sales were promoted by various means, it was clear to the court that they were “under the auspices of” Toast Sales and that the goods were sold by reference to specific identified brands.

This case traversed a number of issues, including:

  • whether the G-STAR marks were used by Toast Sales as trademarks in relation to its retail services, or only in relation to genuine G-STAR clothing; and
  • whether the trademarks had been applied with the consent of the registered owner and, if so, whether that consent had been effectively negated or withdrawn in respect of certain goods.

The G-STAR marks are registered in respect of Class 25 goods, being clothing, footwear and headgear. The court accepted that the service provided by Toast Sales of selling clothing was “closely related” to these registered goods (so satisfying Section 120(2)(b) of the Trademarks Act 1995). The court therefore moved on to consider whether the G-STAR marks were being used as trademarks by Toast Sales in relation to its retail services. G-Star submitted that Toast Sales’ promotional materials would lead customers to go to the warehouses not just because they could purchase G-STAR clothing, but because they would receive G-STAR retailing services there. The court rejected this submission, noting that the TOAST SALES trademark appeared prominently on its advertisements, and that the way in which it was presented indicated that Toast Sales was the entity offering the retail services whereas it was the G-STAR clothing that was being offered for sale.

The second important issue related to the application of Section 123 of the act, which provides that a trademark is not infringed if it has been applied to the relevant goods with the consent of the registered owner. G-Star accepted at trial that Section 123 applied to Toast Sales’ use of the G-STAR marks in its promotional materials. However, G-Star submitted that such consent had been withdrawn by G-Star in relation to certain clothing that Toast Sales had acquired from [email protected] (a Greek company). The basis of this submission was that this particular clothing had been supplied by G-Star to [email protected] pursuant to a contract under which [email protected] agreed not to sub-distribute the products to retailers not authorised by G-Star (and Toast Sales was not an authorised retailer). Accordingly, G-Star argued, as long as it maintained some form of control over the clothing, its consent to the application of its trademarks to those goods could be withdrawn, expressly or implicitly. Thus, once [email protected] took steps to sub-distribute, G-Star’s consent to the application of the G-STAR marks to the clothing was withdrawn, or, simply no longer existed. In the alternative, the consent was conditional, in the sense of a condition subsequent, so if the condition is not met, then the consent never existed at all.

In relation to this issue, both parties relied at trial on the decision in Sporte Leisure Pty Ltd v Paul’s International Pty Ltd (No 3) ((2010) 88 IPR 242; [2010] FCA 1162). Notably, the Full Court of the Federal Court recently handed down its decision on the appeal of this case and dismissed the appeal (Paul’s Retail Pty Ltd v Sporte Leisure Pty Ltd ((2012) 95 IPR 151; [2012] FCAFC 51). In the Sporte Leisure case, the respondent sourced clothing that bore a “Greg Norman” trademark from Sunsports, which had in turn purchased the clothing from BTB. BTB had been licensed by Greg Norman to use the relevant trademarks, but it was authorised to do so only on clothing for sale within India. Sunsports specifically ordered goods for supply to Pakistan and the clothing was manufactured by BTB for the purpose of filling that order. The court held that the manufacture of the clothing was not authorised and, therefore, there was no consent to the application of the trademarks to the clothing.

In the present case, the court thought that the reasoning in Sporte Leisure on this issue was clear – the court had directed itself to the question of whether there was consent to the application of the trademarks at the time of the manufacture of the clothing. Accordingly, as G-Star admitted that the trademarks were affixed to the relevant clothing with the relevant consent, the court thought that this fact “sits in stark contrast” to the facts in Sporte Leisure, where the “inescapable fact” was that BTB knew at the time of manufacture that the goods, contrary to the express terms of the licence, were to be supplied outside of India. Section 123 therefore provided a complete defence to Toast Sales’ alleged infringing conduct in relation to the [email protected] clothing.

Julian Gyngell, Kepdowrie Chambers, Wahroonga

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