A recent case brought by Electrolux in the Federal Court of Australia reflects the trend of brand owners targeting parallel imports of their goods into Australia. Electrolux Home Products Pty Ltd v Delap Impex Ltd [2013] FCA 600.

The Federal Court strengthened the position of trade mark owners in this area in its decision in Paul’s Retail Pty Ltd v Lonsdale Australia Limited (the Lonsdale Case).

“Parallel importation” refers to the practice of unauthorized importers importing into Australia branded goods that were intended by the brand owner to be sold overseas but not in Australia. The goods are not counterfeit – they are simply goods which have been approved for sale within certain countries only.

The unauthorized parallel importation and sale of “grey market” goods often competes with the business of an authorized Australian distributor of the branded goods. An authorized distributor is understandably unlikely to look favorably upon competition by parallel importers if it has made a significant financial investment in order to obtain its distributorship and to grow the brand in Australia.

The Electrolux Case

The case brought by Electrolux Home Products Pty Ltd (Electrolux HP) against Delap Impex Ltd (Delap) is at an early stage in the Federal Court in New South Wales.

Electrolux” is a well-known manufacturer and supplier of various whitegoods under the “Electrolux” and “AEG” brands, including within Australia. Its Swedish holding company, AB Electrolux, owns those trade marks in Australia and has authorized Electrolux HP to use them in connection with its products in Australia.

The respondents in the case are Delap, which is a Hungarian company, and several individuals who are closely related to Delap. Delap offers Electrolux and AEG branded products for sale to Australian consumers through its website.

In the case, Electrolux HP seeks orders to stop Delap from doing so, arguing that it has infringed the Australian registered trade marks of AB Electrolux. Electrolux HP also makes claims in the proceeding under the Australian Consumer Law (ACL), including allegations that Delap has failed to comply with certain requirements concerning warranties against defects.

Reaching Beyond Australia’s Borders

Delap is a Hungarian company based in Budapest. In a recent decision, Justice Katzmann of the Federal Court granted Electrolux’s application for leave to serve documents on Delap through a government agency in Hungary.

One of the issues his Honour had to consider in deciding that application was whether Electrolux has an arguable case against Delap.

In ruling that Electrolux does have an arguable case of trade mark infringement, Katzmann J referred to the judgment of the Full Court in the Lonsdale Case in which it held that “the mere sale by an importer of goods already marked is an infringing use of the mark by the importer”. Paul’s Retail Pty Ltd v Lonsdale Australia Ltd [2012] FCAFC 130

Katzmann J stated:

“Here, the evidence shows that Delap sold through an Australian website goods bearing AB Electrolux’s registered trade mark. The ovens that Mr Lay received from Deluxe Appliances carried the AEG marks.”

Electrolux’s evidence established that it is the only authorised distributor of Electrolux and AEG products in Australia and the only authorised user of those trade marks in this country.

The Lonsdale Case

In the Lonsdale Case, “Lonsdale” branded clothing and footwear was manufactured at the direction of the German licensee of Lonsdale Sports Limited (Lonsdale Sports).

Lonsdale Australia was (and is) the owner of the relevant trade marks in Australia. The respondents in that case, “Paul’s Retail” operated the “Paul’s Warehouse” chain of stores in Australia. Cameron Harvey and Andrew McRobert of Norton Rose Fulbright Australia successfully acted for Lonsdale in the case.

The particular licence granted to the German licensee of Lonsdale Sports permitted it to promote, distribute and sell goods marked with certain “Lonsdale” trade marks within a range of European countries.

In August 2011, the German licensee entered into an agreement with a Cyprus-registered company named Unicell Ltd. Pursuant to that agreement the German licensee sold almost 300,000 units of Lonsdale goods to Unicell Ltd. Paul’s Retail acquired all of them (Paul’s Goods) through a US-based intermediary named TMS LLC.

Although Unicell was registered in Cyprus, title in the Paul’s Goods passed from the German licensee to Unicell Ltd in the Peoples Republic of China (PRC). The Paul’s Goods never entered Europe.

They were shipped from the PRC to Colombo, Sri Lanka and then processed and reloaded in Sri Lanka before being shipped to Sydney, Australia through Singapore. Over 100,000 units of the Paul’s Goods were seized by the Australian Customs and Border Protection Service under notifications lodged by Lonsdale Australia.

One of the key issues in the case was whether the Australian trade marks had been applied to the Paul’s Goods with the consent of the registered owner of those marks. That was important because the Trade Marks Act 1995 (Cth) provides a defence to infringement if the relevant trade marks were applied to the goods with the consent of the registered owner of the trade marks.

In the Lonsdale Case, the Court upheld Lonsdale’s argument that the Paul’s Goods had been sold in the PRC, which was outside the licensed territory of the German licensee of Lonsdale Sports and therefore not within the terms of the consent given by Lonsdale Sports.

The Full Court said that to interpret the licence agreement in the contrary manner contended for by Paul’s Retail would be to deny the “evident intention of the [contracting] parties that the authorised supply of goods bearing the mark[s] should be confined to the defined geographic area”. Because Lonsdale Sports had not given its consent there could be no consent by the owner of the Australian trade marks, Lonsdale Australia.

What Does the Future Hold?

In the Electrolux case, Katzmann J was not required to consider whether Delap was likely to ultimately defeat Electrolux’s claims of trade mark infringement by relying on the “consent” defence.

His Honour also did not have to consider whether difficulties in enforcing any injunctions which might ultimately granted against Delap meant that Electrolux’s application to serve documents in Hungary was futile. That is because although the possibility that an injunction might not be enforceable (ie, against parties who are in Hungary) is relevant to whether an injunction should be granted, it is not relevant to whether leave should be given to serve an originating application seeking an injunction outside of Australia: Humane Society International Inc v Kyodo Senpaku Ltd [2006] FCAFC 116

The case demonstrates the proactive manner in which brand owners are now targeting those who parallel import their products into Australia, including those who solely operate online. Brand owners will be watching the progress of the case with interest.

This article was prepared by Cameron Harvey (cameron.harvey@nortonrosefulbright.com / +61 3 8686 6662) and Frances Drummond (rances.drummond@nortonrosefulbright.com / +61 2 9330 8007) of Norton Rose Fulbright’s Melbourne and Sydney Intellectual property groups.