16 August, 2016

Parallel Infringement - Parallel Importation of Rebranded Cigars Okay, Says Australian Full Federal Court

Tobacco packaging has been a popular topic in the last couple of years, including on this very blog (articles on which can be found here, here and here), particularly in the remit of plain packaging. Whether you dislike the initiative or support it, one can still appreciate the sentiment behind it. What the legislation has done is caused severe issues for products like cigarettes that heavily rely on these distinctive markings to indicate their own brand and distinguish its features from the rest. In Australia the law has been in effect since 2011 under the Tobacco Plain Packaging Act 2011, which means all tobacco products must conform to the requirements of the law in their packaging. With that said, could one repackage purchased tobacco products and subsequently resell them in Australia? The Full Federal Court took this question on after an appeal from the Federal Court whose decision was handed down in late 2015.

The case of Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd dealt with the sale of tobacco products in Australia, specifically cigars manufactured by STG Eersel. The company, in relation to the sale of these goods, also holds several trademarks for cigar brands, including Café Créme (No. 761892), Henri Wintermans (No. 179680) and La Paz (No. 643779). The cigars were manufactured in Belgium, Holland and Indonesia, using packaging incorporating the aforementioned marks. The same cigars are packaged differently for the Australian market in order to conform to the plain packaging legislation mentioned above, which is done abroad similarly to the branded products. Trojan is an importer and supplier of cigars and other tobacco products, supplying, among other items, STG's cigars to the Australian market from overseas, repackaging them to conform to the same legislation. At first instance, Chief Justice Allsop saw that Trojan had not infringed STG's trademarks by repackaging their branded products; however, the decision was appealed by STG.

The Full Federal Court firstly sought to establish was whether the trademarks mentioned above had been infringed by Trojan through their parallel importation, i.e. were STG's marks used "as a trade mark" under section 120 of the Trade Marks Act 1995 and if section 123 (allowing for the use of a trademark if the mark has been applied to the goods prior to or with the consent of the rightsholder) of the same Act applied to those uses.

Lewis now doubted the legitimacy of his cigarettes
What constitutes use "as a trade mark" was initially set out by the Court as "...[a] use of the mark as a “badge of origin” in the sense that it indicates a connection in the course of trade between goods and the person who applies the mark to the goods". This use still has to be assessed within its context, including how the marks are used, as "...not every use of a mark which is identical with or deceptively similar to a registered trade mark infringes the right of property which the proprietor of the mark possesses in virtue of the registration".

The Court concluded that "...a person who, in the course of trade, imports and sells goods to which a registered mark was applied by its owner at the time of manufacture will have used the mark as a trade mark". Their conclusion relies heavily on the impact of parallel importation on the original manufacturer, and the existence of section 123, which, if this were not the case, would be largely redundant. This position follows previous Federal Court case law quite well, even with the existence of foreign cases accepting the opposite position.

As the Court had determined that the importation of the branded goods was indeed a use of the marks, they moved onto the question of whether the use amounted to an authorized use under section 123 of the Act. The section is engaged when, in the past or prior to the use under section 120, the rightsholder (or someone authorized by them) has applied the mark onto the packaging of the goods, which are subsequently sold onward by the third-party (i.e. used "as a trade mark" as discussed above). What seems to remain key here is the reapplication of the mark onto the new packaging by Trojan, which, according to the Court, should be covered by the section through a much wider interpretation of it. Ultimately what the Court concluded was that Trojan were protected under section 123 and did not infringe STG's trade marks.

Finally, the Court did briefly discuss issues surrounding a passing off claim and Australian consumer protection laws, and deemed that Trojan had not passed the repackaged cigars off as STG's, nor had they been in breach of any consumer legislation in their repackaging efforts (specifically deceive or mislead consumers).

The case is a very interesting illustration of the possible perils of parallel importation, and shows the differences in the approaches in the UK and Australia (and, to some extent, the EU). As the world and trade have become more and more global, parallel importation will be a bigger issue for the future. Even so, the Full Federal Court's approach is very sensible, considering the packaging environment that exists in the country for tobacco products. It is unclear whether the decision will be appealed to the High Court, but this writer thinks, after two successive losses, STG might have to just accept defeat.

Source: IP Whiteboard

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