Trade Mark News & Information

Trademark Attorney – Amendments to Trade Marks Act – 25 August 2018

Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Act 2018

The Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Act 2018 (the “IP Laws Amendment Act 2018”) received assent on 24 August 2018.

Certain provisions came into force on 25 August 2018 and the remaining provisions will take effect from a later date of proclamation or, at the latest, 24 February 2019.

There are two significant amendments to current trade marks legislation relating to (1) parallel importation and (2) non-use removal applications.

The parallel importation amendments came into effect on 25 August 2018, but the non-use removal application amendments are not yet in force.

Parallel importation

The Australian Government’s policy position on parallel imports is that they increase competition and the Trade Marks Act was intended to allow for the parallel importation of legitimately trade marked goods. However, recent Federal Court decisions have increased the difficulty for importing legitimately marked goods into Australia and the existing section 123 has permitted the use of various corporate or contractual arrangements that subvert the policy intent of allowing parallel imports.

The amendments are directed to adopting the Productivity Commission’s recommendation to clarify the circumstances where parallel importation of trade marked goods does not constitute infringement. These amendments are intended to ensure section 123 and related provisions of the Trade Marks Act facilitate parallel importation of goods into Australia to the benefit of consumers by limiting the strategic use of restrictions by registered trade mark owners and reduce uncertainty for importers which will ultimately strengthen competition and benefit the market and consumers.

Section 198 A of the Copyright Act is repealed. That previously dealt with circumstances where the parallel importation of copyright material does not infringe a registered trade mark, but is no longer required because the matters it deals with are covered by the amendments made to the Trade Marks Act.

A new section 122A has been inserted as follows:

122A  Exhaustion of a registered trade mark in relation to goods

(1)  In spite of section 120, a person who uses a registered trade mark in relation to goods does not infringe the trade mark if:

                     (a)  the goods are similar to goods in respect of which the trade mark is registered; and

                     (b)  before the time of use, the person had made reasonable inquiries in relation to the trade mark; and

                     (c)  at the time of use, a reasonable person, after making those inquiries, would have concluded that the trade mark had been applied to, or in relation to, the goods by, or with the consent of, a person (a relevant person) who was, at the time of the application or consent (as the case may be):

                              (i)  the registered owner of the trade mark; or

                             (ii)  an authorised user of the trade mark; or

                            (iii)  a person permitted to use the trade mark by the registered owner; or

                            (iv)  a person permitted to use the trade mark by an authorised user who has power to give such permission under paragraph 26(1)(f); or

                             (v)  a person with significant influence over the use of the trade mark by the registered owner or an authorised user; or

                            (vi)  an associated entity (within the meaning of the Corporations Act 2001) of a relevant person mentioned in subparagraph (i), (ii), (iii), (iv) or (v).

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

Note 2:       For subparagraph (c)(iv), an authorised user may, under paragraph 26(1)(f), subject to any agreement the authorised user has with the registered owner, permit another person to apply the trade mark to, or in relation to, goods in respect of which the trade mark is registered.

             (2)  A reference in paragraph (1)(c) to consent to the application of a trade mark to, or in relation to, goods includes, without limitation, a reference to:

                     (a)  consent subject to a condition (for example, a condition that the goods are to be sold only in a foreign country); and

                     (b)  consent that can be reasonably inferred from the conduct of a relevant person.

             (3)  In determining whether a relevant person mentioned in subparagraph (1)(c)(iii) or (iv) was permitted to use the trade mark, disregard how that permission arose, for example:

                     (a)  whether it arose directly or indirectly; or

                     (b)  whether it arose by way of proprietary interest, contract, arrangement, understanding, a combination of those things, or otherwise.

             (4)  In determining whether a relevant person mentioned in subparagraph (1)(c)(v) had significance influence over the use of a trade mark, disregard how that influence arose, for example:

                     (a)  whether it arose directly or indirectly; or

                     (b)  whether it arose by way of proprietary interest, contract, arrangement, understanding, a combination of those things, or otherwise.

This is intended to provide a more comprehensive description of the circumstances where a trade mark registration is not infringed. The overall principle is that the registered owner’s rights are exhausted following the initial application of the trade mark to, or in relation to, goods. The subsequent use of the trade mark in relation to those goods by another person will not infringe the trade mark rights of the registered owner in respect of those goods, as long as there is an appropriate relationship between the registered owner of the trade mark in Australia and the party who applied the mark. Where there is some commercial, corporate or contractual relationship of control or influence between the registered owner in Australia and the party that put the goods on the market, then the goods should be considered genuine parallel imports and should be able to benefit from the defence.

To rely on this, the person who would otherwise have infringed the mark must have made reasonable inquiries before the time of use. This is intended to ensure that the person takes appropriate steps to ensure that the mark was applied by or with the consent of a relevant person mentioned in subparagraphs122A(1)(c)(i) to (vi).

The exact nature of the inquiry will depend on what the hypothetical objective reasonable person would do in the circumstances. Requesting and receiving a certificate of authenticity from the supplier would be sufficient in most circumstances. However, the extent of the inquiries will be determined by the facts of the situation. For example, where the supplier is widely known or suspected to supply counterfeit goods or where the goods are being offered at suspiciously low prices or through dubious trade channels, more searching inquiries may need to be made, such as contacting the trade mark owner to confirm consent. Conversely, by way of example, if the goods are purchased from a retailer widely known to be the licensed distributor of the trade mark owner at the normal price of genuine goods in the relevant market, then no further inquiries may be needed.

Paragraph 122A(1)(c) requires that a reasonable person would have concluded that the trade mark was applied to, or in relation to, the goods by or with the consent of any of the parties listed in subparagraphs 122A(1)(c)(i) to (vi). Paragraph 122A(1)(c) specifically refers to ‘the time of the application or consent’ to protect the parallel importer in the situation where the owner of the Australian trade mark changes between the application of the mark to the goods and the use of the mark on the goods in Australia.

The reasonable person test in paragraph (c) is intended to be objective and is not intended to involve determining the subjective knowledge of the actual person. The question is: what would a hypothetical reasonable person in the importer’s situation (with the information obtained from the reasonable inquiries) conclude?

The availability of the defence to infringement does not turn on where the trade mark had been applied to, or in relation to, the goods.

Subparagraph 122A(1)(c)(ii) refers to an authorised user of the trade mark, which is defined in section 8 of the Trade Marks Act. Subparagraph 122A(1)(c)(iii) refers to a person permitted to use the trade mark by the registered owner. Subparagraph 122A(1)(c)(iv) refers to a person permitted to use the trade mark by an authorised user, such as a sub-licensee. However, this only applies where the authorised user is empowered to permit the sub-licensee or other third person under existing paragraph 26(1)(f). This means that the power to permit someone else to use the mark is subject to any agreement between the registered owner and the authorised user. Subparagraph 122A(1)(c)(v) refers to a person who has significant influence over how the registered owner or authorised user uses the mark. This language is broad and is intended to capture any significant contractual or commercial relationship where one party influences the registered owner or authorised user or vice versa. It is intended to cover contractual arrangements, non-contractual legal arrangements (e.g. deeds or equitable interests), and a wide variety of informal understandings (e.g. where the influence is exercised through the promise of future business or the threat of withdrawing future business; or where the influence is bought through an understanding that a benefit will be provided to a third party).

For instance, it is intended to capture a situation where the Australian trade mark owner licenses the use of the mark to some other person overseas (e.g. a manufacturer or overseas distributor). Subparagraphs (iii) and (iv) are intended to capture any other kind of substantive permission, even if it does not come within the narrow terms of the existing definition of ‘authorised user’ in section 8, which requires control. If the registered owner or authorised user permits a person to use the mark without exercising any further quality or financial control, then that does not change the fact that the mark is still being used with their consent and in relation to goods that are genuine.

It is also intended to address the situation where the initial owner of the mark in Australia assigns the mark to an Australian distributor (with some requirement for the mark to be assigned back or otherwise controlled by the previous owner). Previously, such an arrangement may have been used to attempt to nullify the parallel importation defence, as the party that applied the mark to the goods was now no longer the ostensible owner (even if they effectively controlled the registered owner’s use of the mark via contractual arrangement),

Subparagraph 122A(1)(c)(vi) refers to an associated entity of any of the parties listed in subparagraphs 122A(1)(c)(i) to (v). ‘Associated entity’ is defined in section 50AAA of the Corporations Act 2001. By way of example, this is intended to cover the situation where the trade mark was applied to the goods in a foreign country by one member of a corporate group structure, but the owner of the trade mark in Australia is a different member of the same corporate group.

Subsection 122A(1) is also intended to confirm that the person who subsequently uses the trade mark as described in section 122A does not have to prove that the registered owner applied the trade mark to the goods or consented to the application of the trade mark by another party. Paragraph 122A(1)(c) requires only that, after making reasonable inquiries, it was reasonable to assume that the application of the trade mark was made by or with the consent of any of the parties mentioned in paragraphs 122A(1)(c)(i) to (vi). This is intended to avoid placing an unreasonable evidentiary burden on the parallel importer (or other person) as they could not be expected to have access to the type of documents or information that could prove that consent was actually given, such as contracts or other commercial records.

Subsection 122A(2) provides guidance on how the issue of consent should be interpreted for the purposes of paragraph 122A(1)(c). Paragraph 122A(2)(a) refers to consent that is ‘subject to a condition’, such as a geographical restriction on where a licensee may sell the trade marked goods. This type of conditional consent has been interpreted to mean that the registered owner did not consent to the application of the trade mark to goods intended for sale in a different country. Paragraph 122(2)(a) is intended to ensure that the registered owner cannot circumvent the defence against trade mark infringement provided by section 122A by imposing specific restrictions or conditions on licensees or other authorised users. Registered owners may continue to put such limitations in their licences, but if the mark is used in a manner contrary to that condition, the registered owner should seek a remedy from their licensee, not from a parallel importer.

Subsections 122A(3) and (4) provide guidance on how the permission or significant influence referred to in subparagraphs 122A(1)(c)(iii) to (v) should be construed. Again, the intention is to capture a broad range of behaviours so that the provisions operate to permit genuine parallel imports regardless of how the relevant authorisation or significant influence arose.

The old section 123 is amended by removing all references to goods (because that is replaced by new section 122A) and is retained in its current form for application to services because the parallel importation issues noted above in relation to goods have not arisen in Australia in relation to services. Section 123 now provides as follows:

123  Services to which registered trade mark has been applied by or with consent of registered owner

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.

The repealed section 198A of the Copyright Act continues to apply in relation to proceedings that had been started before 25 August 2018.

The amendments to the Trade Marks Act apply to an action for the infringement of a trade mark that is started on or after 25 August 2018. It does not matter if the infringement of the trade mark is alleged to have taken place before this date or after.

 

Non-use removal applications

There are two bases for removing a trade mark from the Register.

Under section 92(4)(a) a person may apply to have a trade mark that is or may be registered removed from the Register on the grounds that (i) the applicant for trade mark registration had no intention in good faith to use or authorise the use of the mark at the time of filing the trade mark application and (ii) has not used the mark in good faith in Australia in relation to the relevant goods/services at any time up to one month before the non-use application is filed.

Under s92(4)(b) a person may apply to have a registered trade mark removed from the Register on the ground that registered owner has not used the mark in good faith in Australia in relation to the relevant goods/services for a continuous period of three years up to one month before the non-use application is filed.

An application under s92(4)(a) may be made at any time after the filing date of the trade mark application, but an application under s92(4)(b) may only be made after a period of 5 years has passed from the filing date of the relevant trade mark.

Under the amendments, the period under s92(4)(b) for commencing a non-use removal application will be reduced from five years from the filing date of the trade mark application to three years from the date the trade mark becomes registered. The three years period will be calculated from the date the particulars of the trade mark are entered into the Register.

This change will only apply to non‑use applications against new trade mark applications filed after the yet to be proclaimed commencement date of the amendments. A non-use application against a trade mark which has a filing date that is earlier than the commencement date will still be subject to the five years time frame under the existing provisions.