Federal Court decision sends warning to parallel importers

On October 29 2010 the Federal Court handed down its latest parallel importation decision in Sporte Leisure Pty Ltd v Paul’s International Pty Ltd ((No 3) [2010] FCA 1162). The court found that Paul’s Retail Pty Ltd had infringed the trademark registrations of Great White Shark Enterprises LLC. It also found that Paul’s Retail had breached Sections 52(1) and 53(e) of the Trade Practices Act 1974 by making false and misleading representations with respect to the price of Greg Norman apparel in advertising material.
Greg Norman Collection Inc was the head licensor of Great White Shark. Greg Norman granted a licence to an Indian company, BTB Marketing PVT Ltd, to sell Greg Norman apparel in India only. BTB had discussions with a Pakistani company, Sunsports (BVI) Limited, regarding the possible supply of the goods by BTB to Sunsports for sale in Pakistan (in violation of the licence agreement). Sunsports did not disclose at the time that the goods were actually intended for sale outside Pakistan.
PT International Corporation Pte Ltd was Sunsports’ representative in Singapore. PT International had been supplying merchandise to Paul’s Retail for many years. Sunsports advised PT International that it was able to source the Greg Norman apparel from BTB for sale to Paul’s Retail in Australia.
Thereafter, the Greg Norman goods were manufactured by BTB in India and Great White Shark's trademarks were applied to the goods under licence from Greg Norman. Sunsports purchased the goods and on-sold them to PT International for ultimate sale to Paul’s Retail. There were no prior dealings between Paul’s Retail and Great White Shark/Greg Norman.
Greg Norman became aware of the goods being sold at Paul’s Retail outlets in Sydney and obtained samples through trap purchases. Greg Norman claimed infringement on the basis that the goods were sold outside the permitted territory without its consent. 
Paul’s Retail claimed a defence under Section 123 of the Trademarks Act on the basis that the trademarks had been applied to the goods by BTB with Greg Norman’s consent. 
BTB claimed that it was entitled to sell the goods throughout the Indian sub-continent and relied upon emails sent to Greg Norman. However, Greg Norman's evidence was preferred, in part because royalty reports did not cover products sold by BTB to Sunsports. Consequently, the court held that Greg Norman did not consent to the application of the trademarks to the goods for sale outside India, and the defence failed. 
Greg Norman also claimed that it had not consented to use of its trademarks on the goods due to BTB’s failure to comply with certain manufacturing and labelling standards. However, this claim was unsuccessful, as it was not established that the goods were different from other goods that had been sold by BTB and for which Greg Norman had received royalties. There was also little to support a claim that Greg Norman had previously objected to BTB’s actions, and country of origin labelling requirements were found to be recommended, rather than required, by the licence.
Paul’s Retail conceded that it had engaged in trademark use. Based on this concession, it was found to have infringed the trademark registrations.
The director of Paul’s Retail was found not to be personally liable for trademark infringement as a joint tortfeasor because his role in the trademark infringements was in his capacity only as a director. He had not engaged in “the deliberate, wilful and knowing pursuit or a course of conduct that is likely to constitute infringement or which reflected an indifference to the risk of it” (the Mentmore test of liability of a company director for a tort committed by his or her company).
Greg Norman also alleged that Paul’s Retail had contravened Sections 52(1) and s53(e) of the Trade Practices Act by making false and misleading representations in a promotional brochure. Paul’s Retail had circulated the brochure advertising the goods at a discounted price from the recommended retail price (RRP). However, the RRP for the goods was overstated (in one case there was no RRP), thus inflating the actual discount for the customer. As Section 53(e) proscribes the making of false or misleading representations with respect to price, irrespective of any intention to mislead or deceive, Paul’s Retail was found to have contravened Sections 52(1) and 53(e).
The court considered that an order for delivery up was a satisfactory remedy for the infringements, and injunctive relief was granted for the breaches of Sections 52 and 53(e) due to Paul’s Retail's deliberate and careless conduct.

The decision highlights the importance of trademark owners having carefully drafted and policed licence agreements. It is also a warning to parallel importers that directly sourcing goods from an authorised manufacturer will not be sufficient to avoid liability for trademark infringement if the manufacturer is not authorised to supply product to the country of the importer. 
Kathy Mytton and Sean McManis, Shelston IP, Sydney

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