STG v Trojan: protecting trade mark rights in the context of parallel importation

In the recent decision in Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2016] FCAFC 91 (STG v Trojan), the Full Federal Court held that the defence to trade mark infringement under section 123 of the Trade Marks Act 1995 (Cth) (Act), based on the trade mark owner’s consent to application of the trade mark, will apply to the removal and reapplication of a manufacturer’s trade mark by a parallel importer.  As a result, the Court effectively found that a trade mark owner will not be able to rely on its trade mark rights to prevent the reapplication of its trade marks by a third party where it has previously applied (or consented to the application of) the trade mark to the relevant goods.

In doing so, the Court upheld the primary decision of Allsop CJ and the finding that the respondent, Trojan Trading Company (Trojan) did not infringe the trade marks of the appellants, Scandinavian Tobacco Group Eersel BV and Scandinavian Tobacco Group Australia Pty Ltd (referred to throughout this post as STG) by removing those trade marks and reapplying them to cigars manufactured by STG, for the purpose of compliance with the Tobacco Plain Packaging Act 2011 (Cth) and Tobacco Plain Packaging Regulations 2011 (Cth) (plain packaging laws).

This decision could have broad implications for trade mark owners, particularly those who operate in the branded consumer goods space.  This post outlines the Court’s reasoning and provides some commentary on the operation of section 123 of the Act and the implications of the decision.

Background and primary decision

STG is a cigar pipe tobacco manufacturer based in the Netherlands, and is the owner of the CAFE CREME, HENRI WINTERMANS and LA PAZ trade marks in respect of cigars (STG Trade Marks). Since 2013, all authorised products distributed by STG in Australia have been packaged overseas in compliance with Australia’s plain packaging laws.  Trojan is a parallel importer of tobacco products which it purchases overseas and then repackages and sells in Australia, including genuine STG cigars manufactured overseas which do not comply with Australia’s plain packaging laws.  Trojan then repackages the cigars by removing the products from their original packaging, and re-packaging them in compliance with the plain packaging laws.

This process necessarily involves Trojan “reapplying” the STG Trade Marks to the new packaging. STG brought proceedings against Trojan alleging that this conduct constituted trade mark infringement and passing off under the Australian Consumer Law.

In relation to the claim of trade mark infringement, Trojan argued that whilst its use of the STG Trade Marks did constitute use as a trade mark, the defence under section 123 of the Act applied:

“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”.

Allsop CJ found in favour of Trojan at first instance and held that the defence under section 123 was available because the marks were originally applied to, or in relation to, the goods by or with the consent of STG before their acquisition by Trojan. STG appealed to the Full Federal Court.

On appeal

After dispensing with the initial question of whether Trojan’s use of the STG Trade Marks constituted use as a trade mark (which was decided in the affirmative – more on this below), the Court turned to the central question on appeal: did the defence under section 123 apply in the circumstances of this case?  Could it be said that STG had consented to the application of the trade marks to the plain packaging on the basis that it had previously applied the marks to the goods in their original packaging?

STG submitted that the defence should not apply because it did not consent to the application of the STG Trade Marks on Trojan’s packaging, and purchasers of its product may be led to believe that STG was responsible for or consented to the application of the STG Trade Marks on the products in their plain-packaged form.  The Court found in favour of Trojan and rejected STG’s argument for the following reasons:

  • The correct interpretation of section 123(1) directs attention to any prior application of the mark on or in relation to the goods which occurred by or with the consent of the registered owner.  This approach leaves it open to another person to purchase the goods, remove the mark, and then re-apply it for purposes of resale.
  • The argument that consumers may be misled that STG was responsible for the packaging was irrelevant to the proper interpretation of section 123(1), as the owner of a registered mark could seek remedies for passing off or misleading or deceptive conduct where conduct like Trojan’s was likely to cause deception.
  • The temporal requirement of section 123(1) (i.e. the requirement that the mark be applied to the relevant goods by the registered owner prior to the use by the third party) will be satisfied if “at some time in the past, which may be after the time of manufacture, the mark has been applied to or in relation to goods by or with consent of the owner”.  If those goods are later sold by a person in circumstances which involve the use of a mark that was previously applied to or in relation to goods by or with the consent of the owner, then section 123(1) will be engaged.
  • There need not be any direct physical relationship between the registered owner’s use of the mark and the goods. It is the previous application to or in relation to the goods by or with the consent of the registered owner that is critical.

STG also submitted that, from a policy perspective, the goodwill associated with a trade mark may be harmed if resellers were permitted to repackage goods and to remove and reapply the mark without the registered owner’s consent.  The Court answered this submission by noting that the policy of the Act is to strike a balance between the rights of registered trade mark owners and other people who may have an interest in using a registered mark – including parallel importers.

Lastly, the Court swiftly rejected STG’s claims of passing off, agreeing with Allsop CJ that consumers of the products repacked by Trojan would not assume that they were either in the original packaging or had been repackaged with STG’s consent.

Use as a trade mark? Champagne Heidsieck

While the scope of section 123(1) was the key issue on appeal, the Court also took this opportunity to explore the policy which underpins the defence.  This policy finds its genesis in Clauson J’s judgment in Champagne Heidsieck Et Cie Monopole Societe Anonyme v Buxton [1930] 1 Ch 330 (Champagne Heidsieck), in which the court found that a person who merely sells goods to which a registered mark has been applied by or with the licence of the trade mark owner does not “use the mark as a trade mark”, even though its presence on the goods indicates there is a connection between the goods and the registered owner.  This follows from the premise that the exclusive right to use a trade mark as a trade mark is conferred on the registered owner.

The Court in STG v Trojan canvassed various authorities which have since considered the rule in Champagne Heidsieck and noted that by the time the current Act was drafted, the question of whether use like Trojan’s in this instance constituted use as a trade mark was by no means settled.  However, in any event, the Court concluded that section 123(1) of the Act gives the rule in Champagne Heidsieck express statutory footing, which leaves no scope the court to give the rule more expansive operation by reference to authorities which were decided under different statutes.  The question of whether Trojan’s conduct constituted infringement of the STG Trade Marks therefore had to be determined by reference to section 123(1) alone.

Commentary and implications

Some commentators have argued that in excluding the Champagne Heidsieck rule from Australian law, we have lost the flexibility of being able to consider the issue of parallel importation through the lens of trade mark use.

Relatedly, the Harper Review recently recommended that section 123 defence be independently reviewed, and the Australian Productivity Commission provisionally recommended in April 2016 that the section 123 defence be amended to ensure that parallel imports do not infringe Australian registered trade marks, as long as the goods have been brought to market elsewhere by the owner of the mark or its licensee.  If the recommendation remains, trade mark owners will have very limited recourse to prevent the importation and sale of parallel goods based on trade mark rights. The results of the Productivity Commission’s enquiry are expected to be presented in September 2016. Stay tuned for further developments on this front.

More broadly, the decision in STG v Trojan will likely be most relevant to and trade mark owners which operate in the branded consumer goods space – particularly those which are often subject to parallel importation. Relatedly, while the circumstances of this case arose in the context of Australia’s plain packaging laws, the ramifications for trade mark owners may be much broader – particularly for producers of goods where the packaging and get up are integral to brand identity.