Authorised Use, Case Notes

Close but no cigar: s 123 provides parallel-importer with defence to trade mark infringement despite repackaging

A Danish cigar manufacturer (STG) brought proceedings against an Australian parallel-importer (Trojan) for infringement of its registered Australian trade marks HENRI WINTERMANS, CAFE CREME and LA PAZ.  It also alleged misleading or deceptive conduct and passing off.

The essence of the alleged TM infringement was that, after purchasing and importing STG’s cigars, Trojan had repackaged them in order to comply with Australia’s plain packaging legislation.  As part of that repackaging process, STG’s registered marks were placed on the new packaging.  This was done without STG’s consent.  The cigars were then sold to retailers in the new packaging.

It was accepted by STG that the cigars imported into Australia by Trojan were genuine in the sense that they were manufactured by STG.  There was no contention that the Trojan cigars were in any material way different from the “authorised products” that were brought into Australia and sold by STG’s Australian subsidiary.

Is this a prima facie infringement?

Trojan accepted that the use of the STG trade marks on the new packaging was use of those marks “as a trade mark” for the purposes of s 120 of the Trade Marks Act 1995 (Cth) but contended that this was STG’s use, not Trojan’s, because “the connection in trade was between the goods and the manufacturer, not between the goods and Trojan.”

While it may be slightly counter-intuitive (and Allsop CJ considered it was) to conclude that there is prima facie infringement in circumstances where a third party sells goods emanating from the registered owner and bearing that registered owner’s mark, that is the plain wording of s 120 of the TMA.  Allsop CJ pointed out that this conclusion had been reached by at least four Full Courts and was supported by several obiter comments from the High Court.

His Honour therefore concluded that Trojan’s use of STG’s marks on its repackaging was a prima facie infringement.

Does s 123 apply?

Section 123 of the TMA provides:

Goods etc. to which registered trade mark has been applied by or with consent of registered owner

(1)  In spite of section 120, a person who uses a registered trade mark in relation to goods that are similar to 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 registered owner of the trade mark.

Note:          For similar goods see subsection 14(1).

             (2)  In spite of section 120, a person who uses a registered trade mark in relation to services that are similar to services in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied in relation to the services by, or with the consent of, the registered owner of the trade mark.

Note:          For similar services see subsection 14(2).

Allsop CJ considered that this provision “applies naturally to parallel importing and second hand goods.”

This case differed from the usual parallel importing cases because of the repackaging: the STG marks had not been applied to Trojan’s repackaging with STG’s consent.

This opened s 123 to alternative readings.

STG contended that since Trojan’s application of the STG marks to the repackaging was without STG’s consent, it’s use of those marks fell outside the protection of s 123.

Trojan argued however that the STG marks had been applied to the the relevant goods with STG’s consent.  They were then removed from the goods and reapplied in the form of the new packaging – but the statutory test was whether the marks had been applied with the owner’s consent.

Allsop CJ considered that Trojan’s construction “more naturally conforms with a purpose in s 123 of protecting as non-infringing use that which does no more than draw a connection between the goods and the registered owner...”  His Honour therefore concluded that s 123 was engaged and Trojan’s use of STG’s marks was non-infringing.

As STG argued in its submissions, this does seem to muddy the waters on the issue of authorised use under s 8 of the TMA – as to which we will learn much more when the Full Court gives its decision in the appeal from Skyy Spirits LLC v Lodestar Anstalt [2015] FCA 509 which is listed for hearing on 10 November 2015 before a bench of five judges.

The passing off and misrepresentation claims were also dismissed.

The decision can be found here.

Authorised Use, Case Notes, Non-use

Wild Goose chase might go all the way: Skyy Spirits LLC v Lodestar Anstalt [2015] FCA 509.

The ongoing battle between the owners of Wild Turkey Bourbon and Wild Geese Rare Irish Whiskey (which has been running for nearly 15 years) continues rolling on. Justice Perram delivered judgment last week in an “appeal” from an ATMO decision in which the delegate ordered removal of the marks WILD GEESE and WILD GEESE WINES from the Register for non-use.

The facts are a little unusual and slightly complicated.

The owners of Wild Geese Rare Irish Whiskey first registered the word mark WILD GEESE in Australia in 2000 in classes 32 and 33. Subsequently, in 2005, a small South Australian wine maker applied to register the marks WILD GEESE and WILD GEESE WINES. The wine maker (which was run – or owned – by Adelaide silk Patrick O’Sullivan QC) was immediately confronted by the earlier registration. It sought to overcome this problem by having the earlier mark removed for non-use.

Readers will know that a trade mark can be removed from the Register if it has not been used for a continuous period of three years: s 92 TMA.

Mr O’Sullivan soon discovered that there was already another application to remove the earlier mark from the Register – it came from the Wild Turkey interests. After some correspondence between Mr O’Sullivan and Wild Turkey, they came to an agreement: he agreed to assign his company’s interests in its marks to Wild Turkey and they, in turn, agreed to license those marks back to his company in perpetuity for $1. Wild Turkey also took an assignment of Mr O’Sullivan’s company’s application to remove the Irish Whiskey WILD GEESE mark from the Register.

That application ultimately succeeded – but not before going the Full Court of the Federal Court: Austin, Nichols & Co Inc v Lodestar Anstalt (2012) 287 ALR 221.

Wild Turkey then secured registration of the word marks WILD GEESE and WILD GEESE WINES and it is these marks that were licensed to Mr O’Sullivan.

The Wild Geese interests meanwhile had started selling their whiskey in Australia and wished to use the WILD GEESE mark here. Wild Turkey, on the other hand, despite selling Wild Turkey bourbon here, did not sell anything under their registered WILD GEESE and WILD GEESE WINES marks. Once the statutory three years had passed since registration of those marks, Wild Geese made its move. It sought removal of the WILD GEESE and WILD GEESE WINES marks from the Register on the grounds of non-use. (What’s good for the goose, right?)

But the Wild Turkey interests pointed to the continued use throughout the relevant period by Mr O’Sullivan QC. Although his sales were relatively small (around $3,000-$5,000 per year), Perram J accepted that Mr O’Sullivan’s company had used the marks during the non-use period in the relevant sense.

But did this use constitute “authorised use” within the meaning of s 8 of the TMA?

Section 8 provides that use will only be “authorised use” to the extent that it is “under the control of the owner of the trade mark”. This required some attention to be given to the detail of the licence agreement between Mr O’Sullivan and Wild Turkey. The agreement required Mr O’Sullivan’s company to observe certain quality control measures and, if requested, to provided several bottles of his wine to Wild Turkey to allow it to conduct its own analysis. If the wine did not meet a certain defined standard, the licence agreement could be terminated by Wild Turkey.

The agreement also placed restrictions on Mr O’Sullivan’s company in respect of where he could sell his wine and the manner in which he could use the marks.

Despite these provisions, Justice Perram found that, in fact, Wild Turkey exercised no actual control over Mr O’Sullivan’s company’s use of the marks – except that he would have needed Wild Turkey’s permission for any export trade. His Honour considered that the licence agreement was “not intended to deliver anything but the appearance of control to the Wild Turkey interests.”

Wild Turkey contended that the use of the marks was nevertheless under their control within the meaning of s 8. The issue for the Court was whether something less than actual control was sufficient.

Justice Perram reviewed the statutory history of s 8 (which came into effect with the 1995 Act and replaced a provision in the 1955 Act which referred to a “connexion in trade” between the licensee and licensor rather than “control”) and the authorities under both the 1995 and 1955 legislation. On the basis of this analysis, he concluded that s 8 unambiguously requires “actual control” and that this is consistent with the position under the 1955 Act.

However, his Honour was confronted with the Full Court’s decision in Yau’s Entertainment Pty Ltd v Asia Television Ltd (2002) 54 IPR 1. In that case, the Full Court upheld the primary judge’s decision that actual control is not required. Although Perram J respectfully dissented from the conclusions of the primary judge and the Full Court in Yau, he considered himself bound to follow it. Accordingly, he concluded (clearly reluctantly) that “for the purpose of s 8(1) a mere theoretical possibility of contractual control is sufficient to constitute authorised use”.

For this reason, the appeal was allowed. It is rare for the primary judge’s decision to form the basis of the appellant’s submissions on appeal but this will surely be such a case.

An interesting final point – alluded to by Justice Perram at the end of his judgment – is where Mr O’Sullivan stands in all of this. If the marks are ultimately removed for non-use, the licence agreement is worthless. Despite using the marks since 2005, and having the protection of trade mark registration through Wild Turkey since 2007, Mr O’Sullivan’s right to continued use of the mark will be in jeopardy (if not entirely lost).