Parallel Importers welcome in Australia
In Polo/Lauren Company L.P. v Ziliani Holdings Pty Ltd [2008] FCAFC 195 (18 December 2008) the Full Federal Court has dismissed an appeal by Polo/Lauren Company L.P. (Polo/Lauren) seeking to prevent the parallel importation of goods embroidered with their signature polo player logo.
Parallel importation occurs where genuine goods are sourced from overseas markets at a lower price than the authorised product for sale in Australia without the authority of the local licensee. This activity has continued to increase. The limitations against parallel importation imposed by the Trade Marks Act 1995 (Cth) means that brand owners have had to rely on other intellectual property rights to protect their brands. However, this decision confirms that successful claims based on copyright are similarly now limited, and that restricting trade of genuine products by local brand owners is becoming increasingly difficult.
Background
Ziliani Holdings Pty Ltd (“Ziliani”) is a clothing retailer in Sydney whom imported into Australia, from various trade fairs in the United States, genuine Polo Ralph Lauren garments bearing the well-known polo player logo. Whilst the garments were authentic, they were sold without the consent of the relevant Australian subsidiary, Polo/Lauren. Unsurprising, Polo/Lauren took action to restrain such action. In view of Section 123 of the Trade Marks Act 1995, which provides that the importation into Australia of genuine goods bearing a trade mark legitimately affixed overseas is not an infringement of the local trade mark, Polo/Lauren’s claim was based on the copyright in the polo player logo. Specifically, breach of Sections 37 and 38 of the Copyright Act 1968 which provide that it is an infringement of copyright to import a copyright work for sale without the permission of the copyright owner (secondary infringement).
However, Section 44C of the Copyright Act 1968 provides a defence to such infringement in cases where the copyright is a "label" which is incorporated into the surface of an article. Ziliani successfully relied on this defence on the basis that the polo player logo embroidered onto the goods was actually a “label” which is exempt from protection since it is a “non-infringing accessory”.
Additionally, it was held by Justice Rares that the embroidered logo was a “corresponding design” within the provisions of the Copyright Act 1968 which deny copyright protection to industrial designs. In reaching his decision the Trial Judge found a visual “shape and configuration” in the logo by reason of the alteration, including changes to the texture and shape, in the fabric created by its embroidering.
In the current appeal, the Full Federal Court considered both of the above copyright issues. Of particular relevance to trade mark law, the Court considered whether the Trial Judge had erred by effectively assimilating the notion of a “label” with the notion of a trade mark.
Label v Trade Mark
Section 44C of the Copyright Act 1968 provides that:
“the copyright in a work a copy of which is, or is on, or embodied in, a non-infringing accessory to an article is not infringed by importing the accessory with the article”.
The word “accessory” is defined in Section 10 of the Copyright Act 1968 and includes amongst other things “a label affixed to, displayed on, incorporated into the surface of, or accompanying, the article” or “a label affixed to, displayed on, incorporated into the surface of, or accompanying, the packaging or container in which the article is packaged or contained”.
Accordingly, importation of an article bearing a “label” does not infringe copyright in that “label”.
The Full Court concurred with the Trial Judge in finding that a label within the definition of “accessory” can be, or may contain, a trade mark. In the present case, the trade mark is physically manifested and incorporated into the article and is therefore being used to identify the article with its source, stating: “its purpose is to label the goods; it is a label”.
In fact, the Full Court pointed out that the "label" in R & A Bailey Co Ltd v Boccaccio Pty Ltd & Ors (1986) 4 NSWLR 701 (a very influential case at the time of drafting Section 44C) was also a trade mark and that the labeling exemption exactly contemplates such “labels”, a point the Polo/Lauren submission “overlooks”.
The Full Court also noted that Section 198A of the Copyright Act 1968 which deals with non-infringement of trade marks in relation to the importation of copyright material adds support to their finding that a “label” can be or contain a trade mark.
The Full Court has confirmed that copyright law is not available to trade mark owners as an alternative means for stopping parallel importation in cases where there is copyright in a trade mark and the trade mark is physically manifested and incorporated into an identifiable article, essentially whenever a trademark appears on clothing. Brand owners will need to turn to other actions such as passing off and the Trade Practices Act 1974 (Cth) to attempt to ward off parallel importers.
