2. Counsel agreed that the two applications might be heard together. In the matter in which Mr Bevk is respondent, it was also agreed that the hearing should be concerned with preliminary questions only (to be determined separately from any other question before any further trial in the proceedings under Order 29 rule 2), which counsel agreed in stating as follows:

sale and/or selling, by way of wholesale or

retail, guitars bearing any of the registered

trade marks of which the Applicant is the

registered proprietor, and being guitars

which have been imported into Australia by a

person or corporation other than the

Applicant after 10th September, 1987, and:

A. (i) Being guitars offered as secondhand

guitars as defined in sub-paragraph

(ii) hereof; and/or

(ii) Being guitars which have previously

been sold by retail by any person

or corporation and are

subsequently:-

(1) Purchased and resold by the

Respondent: or

(2) Placed with the Respondent on

consignment and resold by the

Respondent whether on its own

behalf or on behalf of any

other person: or

B. Being guitars manufactured before 10th

September, 1987;

is and will be infringing the trade marks of

the Applicant".

In the application in which Mr Sullivan is respondent, the same questions are raised, but in that matter it is specifically agreed that the questions relate only to guitars which would in normal parlance be referred to as second-hand guitars, whereas Mr Bevk claims to be entitled to sell guitars purchased by him at retail in the United States, bearing the Fender trade mark, which have never been used. Another difference between the cases is that the answer to the question raised will determine the sole outstanding issue in the action against Mr Sullivan, whereas only a preliminary question is to be determined in the action against Mr Bevk. It is convenient also to note here that, in both cases, the respondents argue they would be entitled to sell guitars manufactured before 10 September 1987, the date on which the applicant became registered proprietor of the relevant trade marks, irrespective of the position in respect of guitars manufactured subsequently.

3. In 1978, when the United States corporation Columbia Broadcasting Systems Inc. ceased to carry on business in Australia, the applicant became the sole agent for sale within Australia of products bearing the Fender trade mark and other trade marks in issue in these proceedings. Following negotiations in 1985 with Fender Musical Instruments Corporation in California, the applicant acted as sole distributor. Its position was formalized by a distributorship agreement entered into on 2 January 1987. That agreement recited that Fender Musical Instruments Corporation ("Fender") produced acoustic and electric guitars and various products ("the Products") sold under the trade mark Fender and other marks including the mark Squier but not including the remaining marks referred to in these applications; that the applicant ("Distributor") represented "that it possesses the contracts, knowledge and ability to promote the sale and use of the Products and is desirous of maintaining and increasing demand for and selling the Products on an exclusive basis in the territory (Australia)"; and Fender's desire to maintain and increase demand for its products in Australia. The agreement then proceeded to appoint the applicant "as the exclusive distributor for the sale of the Products at wholesale within the territory consisting of AUSTRALIA." The appointment was for an initial term extending to 31 December 1989, with provision for successive annual renewals thereafter. The agreement required the applicant to provide and maintain an efficient repair and maintenance service, and to carry in stock an adequate quantity of repair and replacement parts. Specific provision was made concerning the applicant's right to use the trade marks referred to in the agreement. That provision was in the following terms:

"Distributor acknowledges that the Trademarks

are the property of Fender and shall not use

any of the Trademarks as a corporate or

business name or otherwise except in

conjunction with the sale and promotion of

genuine Products purchased from Fender.

Distributor shall not make any misleading use

of any of the Trademarks, and Distributor

shall not obliterate, deface, destroy,

conceal or otherwise affect the commercial

impression of the Trademarks and shall

wherever appropriate use the symbol (an R in

a circle was here shown) adjacent to the

trademarks together with such other notice as

Fender may determine to be necessary to

maintain protection of the Trademarks. Upon

termination of this Agreement, Distributor

shall discontinue use of the Trademarks

directly or indirectly in connection with

Distributor's business, nor use any other

trademark, name, title, or expression so

nearly resembling any of the Trademarks as

may be likely to lead to confusion or

uncertainty or to deceive the public."

4. The symbol referred to in the agreement is an accepted abbreviation in some countries (including the United States, but not including Australia) for the purpose of notice to the public that a trade mark is a registered trade mark: A.J. Jacobs, Trademarks Throughout the World, 4th ed. (1989) sec. U-50; appendix B, table 13. The requirement to use it "wherever appropriate" can have no significance in the present applications. No recognized meaning attaches to it in Australia. In any case, its purpose is simply to ensure that the registered proprietor will be able to sue promptly for an infringement, alleging that public notice had been given of the registration of the trade mark. Under United States law, this allegation is relevant to the establishment of a claim for damages: Jacobs, ubi cit. supra.

5. The applicant was also required by the agreement to conduct, at its own expense, advertising and promotion within Australia to maintain and increase sales of the products, being supplied with advertising art work and information by Fender. The interpretation of the agreement was to be governed by the laws of the state of California.

6. The trade marks referred to in the applications were first registered in Australia on 25 November 1968. The applicant was by transfer registered as proprietor of them on 10 September 1987. Although, on the pleadings, Mr Bevk denies the applicant's beneficial ownership of the trade marks, and the validity of its registration as proprietor of them, the preliminary questions are framed on the footing of acceptance that the applicant is the registered proprietor. No issue has been raised at this stage concerning the terms upon which there were transferred to the applicant, eight months after the execution of the exclusive distributorship agreement, a number of trade marks including two of those mentioned in that agreement, as well as several not mentioned in it. On the face of the registration, the applicant is the proprietor of all the trade marks (and see s. 82(7) of the Trade Marks Act, 1955), but any dispute as to any limitation alleged to restrict the registered proprietor's rights must await the determination of the preliminary questions. It may, however, be noted that the majority of the Court of Appeal, in Revlon Inc. v. Cripps & Lee Ltd. (1980) 6 FSR 85 at 105-7, refused to permit "a matter of commercial reality" to displace the registered proprietor from his statutory position in favour of an entity for which the benefit of the mark was ultimately held.

7. The applicant has established a network of about 200 authorized retailers, with warranty repair and service facilities in each state of Australia. Its promotional activities include regular visits by sales representatives, regular advertisements in magazines and music publications, regular circulation of the applicant's bulletin to its retailers containing information as to product development and improvements, the sponsoring of competitions including an annual competition which is extensively advertised in newspapers throughout Australia, offering a scholarship of significant value for musical training in the United States, participation in musical exhibitions throughout Australia, the holding of product seminars and clinics, and the promotion of outstanding musicians through the presentation of awards and by other means. The applicant's sales figures tell a story of continuous and rapid expansion.

8. Advertising by the applicant puts and keeps before the public the name Fender Australia Pty Ltd - not merely the Fender marks. When the products sold by the applicant are imported, they already bear the trade marks, but in addition the applicant affixes to the cases of all those guitars sold in cases a red sticker with the Fender mark in black letters (followed by the symbol previously mentioned), under which is written quite prominently this message:

"FENDER AUSTRALIA PTY LIMITED is the

registered proprietor and owner for Australia

of the following Registered Trade Marks:

Fender.Stratocaster.Strat.Telecaster

Tele.Squier.Super Bullets".

9. Notwithstanding that the applicant makes use of advertising material and warranty forms supplied to it by Fender Musical Instruments Corporation, the evidence shows that its own name is constantly associated with the distribution of Fender guitars in Australia. On the evidence, I think it is proper to conclude that members of that section of the Australian public having an interest in acoustic and electric guitars would be likely to understand the trade marks in question as indicating products acquired from their American producer, and distributed in Australia, by the applicant. The marks are badges of a commercial origin in Australia, as well as of an anterior source overseas. Furthermore, the applicant has to some extent been responsible for quality control of the products sold under the marks, insofar as it carries out inspections and rectification work, and has its authorized repairers change electrical parts unsuitable for use in Australia. It also checks the technical expertise of those persons appointed as authorized retailers and repairers, and in some instances restricts the products made available to particular retailers on the ground of insufficient expertise to promote all products in a manner which will maintain and enhance their reputation. In the case of a product made overseas and sold around the world, there may be developed, and has been in this case, an Australian goodwill, associated with a trade mark registered in Australia, which is distinct from the goodwill in respect of the product overseas: cf R.J. Reuter Co. Ld. v. Mulhens (1954) Ch 50 at 89, 95-96.

10. The events which triggered these proceedings can now be briefly stated. In August 1988 the respondent Mr Sullivan, and in September 1988 the respondent Mr Bevk, each offered for sale by retail guitars bearing trade marks, such as Fender, identical with those of the applicant. As I have already stated, the only issue now raised by Mr Sullivan is his claim to be entitled to sell Fender guitars which would in ordinary parlance be described as second-hand. Mr Bevk, however, has not only sold, but claims to be entitled to sell, both new and second-hand guitars purchased in the United States. There is evidence showing he sold, as second-hand but also as "the latest" and "not very old at all", a Fender Stratocaster guitar, bearing those trade marks, which was in fact a new model and unused. It had been obtained by him in the United States and had not come from the applicant. At about the time of the sale I have mentioned, he had on display in his shop at Coogee at least fifteen of the latest model Fender guitars. He told the purchaser he had about sixty-five Fender guitars in stock.

11. In evidence, Mr Bevk explained that he went to the United States early in 1988, and again in August 1988, in order to purchase stock. He purchased in March nine new Fender guitars from a retail shop in Hollywood, and in August a further fourteen from a retail shop in Culvina, California. He also purchased in February and August from a number of different retail guitar shops in the United States forty-five used Fender guitars, most of which were over five years old and all of which showed signs of extensive use. He imported these guitars into Australia for sale, as to some of them, by himself, and, as to others, by another person. The trade marks on the guitars were identical with the trade marks of the applicant.

12. It is convenient to consider first the question of sale of second-hand guitars. Counsel for the applicant submitted there is no relevant distinction between new and second-hand goods for the purposes of trade mark infringement. This proposition expressly embraced, as well as goods obtained overseas, second-hand goods which had originally been purchased from the proprietor of the mark in Australia. He relied on the literal terms of ss. 58 and 62 of the Trade Marks Act, 1955. Section 62(1) reads:

"A registered trade mark is infringed by a

person who, not being the registered

proprietor of the trade mark or a registered

user of the trade mark using by way of

permitted use, uses a mark which is

substantially identical with, or deceptively

similar to, the trade mark, in the course of

trade, in relation to goods or services in

respect of which the trade mark is

registered."

Counsel also relied on a dictum contained in the judgment of the Full High Court in W.D. & H.O. Wills (Australia) Limited v. Rothmans Limited [1956] HCA 15; (1956) 94 CLR 182 at 188. There, cigarettes bearing the trade mark "Pall Mall" were purchased in the United States, where they were manufactured by or on behalf of British-American Tobacco Co., the proprietor in the United Kingdom of that mark. In Australia, the registered proprietor of the same mark was W.D. & H.O. Wills (Australia) Limited. The cigarettes purchased in the United States were imported into Australia, not for resale, but for smoking by certain Americans and others resident in Australia. In affirming a decision that the mark should be removed from the register for non-user in Australia, the Full Court held that the transactions mentioned did not involve any use of the mark in Australia. At 188 the court (Dixon C.J., McTiernan, Williams, Webb and Taylor JJ.) said:

"The cigarettes that reached Australia for

consumption by the Australian purchasers were

in no different position from cigarettes

which a traveller might have purchased in the

United States and brought with him to

Australia for his own consumption here. If a

purchaser instead of smoking the cigarettes

had attempted to resell the packets he would

of course have used the trade mark and would

have been liable to be sued for infringement

under s. 53 of the Trade Marks Act. But that

would have been an unlawful use of the trade

mark by the purchaser and not a use by the

proprietor of the trade mark and it is the

latter use, and the latter use only, with

which we are concerned."

In my opinion, counsel's reliance on this passage was misplaced. There cannot in the normal sense be second-hand cigarettes or second-hand food. These are items which use consumes. So the dictum relates to a further sale of new goods after their original sale at retail. Its significance in the present case must be for the light it throws on those transactions by which Mr Bevk made retail purchases of new guitars in the United States for resale in Australia.

13. But the W.D. & H.O. Wills case does contain statements which are more relevant to the present question. At 188-189 the court made a number of quotations from the decision of the House of Lords in Aristoc Ltd v. Rysta Ltd (1945) AC 68. These included Viscount Maugham's statement:

"My Lords, it seems to me beyond doubt that

hitherto a registered trade mark has been

understood as being used in relation to goods

for the purpose of indicating the origin of

the goods, in other words, for the purpose of

indicating either manufacture or some other

dealing with the goods in the process of

manufacture or in the course of business

before they are offered for sale to the

public."

The passage quoted went on to refer to the history of trade mark law, and the close connexion between a mark and the goodwill of a business. The court also cited the words of Lord Macmillan:

"A connexion with goods in the course of trade

in my opinion means, in the definition

section, an association with the goods in the

course of their production and preparation

for the market. After goods have reached the

consumer they are no longer in the course of

trade. The trading in them has reached its

objective and its conclusion in their

acquisition by the consumer."

"In our opinion the whole trading in the

cigarettes took place in the United States.

It was there and there only that the trade

mark 'Pall Mall' was being used for the

purposes of trade. When the goods left the

United States they were no longer in the

course of trade. Trading in them had

finished. They had been consigned to the

consumer and were at his risk."

Similarly, in the later decision Estex Clothing Manufacturers Pty Limited v. Ellis and Goldstein Limited (1966) 116 CLR 254 at 267 Windeyer J. said:

"The manufacturer who sells goods, marked with

his mark, to a warehouseman, wholesaler or

retailer does not, in my view, thereupon

cease to use the mark in respect of those

goods. The mark is his property although the

goods are not; and the mark is being used by

him so long as the goods are in the course of

trade and it is indicative of their origin,

that is as his products. Goods remain in the

course of trade so long as they are upon a

market for sale. Only when they are bought

for consumption do they cease to be in the

course of trade." (Emphasis added.)

14. In Cornish on Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights (1981) at page 574 a passage is cited from the judgment of the European Court of Justice in Centrafarm v. Winthrop (1974) ECR 1183; (1974) 2 CMLR 480 defining a trade mark right as:

"the guarantee that the owner of the trade

mark has the exclusive right to use that

trade mark, for the purpose of putting

products protected by the trade mark into

circulation for the first time, and is

therefore intended to protect him against

competitors wishing to take advantage of

(its) status and reputation ... by selling

products illegally bearing (it)." (Emphasis

added.)

15. It has always been accepted that trade marks legislation was "not to give new rights, but to regulate the use of, and the means of protecting, trade marks." (See James Minifie and Company v. Edwin Davey and Sons [1933] HCA 17; (1933) 49 CLR 349 at 363 per McTiernan J. quoting Cotton LJ., and at 361, per Dixon J. whose judgment was cited, as to this point, by Smithers J. in Atari Inc. and Futuretronics Australia Pty Ltd v. Fairstar Electronics Pty Ltd [1983] FCA 2; (1982) 50 ALR 274 at 276-277. See too Champagne Heidsieck et Cie Monopole Societe Anonyme v. Buxton (1930) 1 Ch 330 at 341 and G.E. Trade Mark (1973) RPC 297 at 327 (also reported as General Electric Co. (of USA) v. General Electric Co. Ltd (1972) 1 WLR 729 at 743-744); but see New South Wales Dairy Corporation v. Murray-Goulburn Co-operative Company Limited (Gummow J., unreported, 3 April 1989) at 46-47, where some qualifications of the received understanding are stated.) To read the statute's control as stopping at the shore where goods are launched from commerce into use would be in accord with the principles which pre-date legislative intervention in the area of trade marks. This is not just because when goods are bought for consumption they cease to be in the course of trade. It is also because of the fundamental nature of a trade mark, demonstrated by the history of its development in the law, as an aspect of the goodwill of a particular business. The goodwill of a business producing or marketing goods is connected with the sale of the goods it supplies, not with a market in what those goods will become after they have been used for some time. The goodwill with which the mark of Holden cars is connected is that of a business manufacturing and selling new cars. A business selling used cars may also have a goodwill, and a mark associated with it, but that goodwill is not to be confused with the goodwill of General Motors, however much the reputation of Holden cars may assist a particular sale. Generally, a second-hand business will deal in a number of different makes of goods, as indeed is the case here, where the evidence shows that Mr Bevk deals in a range of second-hand guitars bearing various marks.

16. The same point may be approached from a different angle. The connexion in the course of trade which it is the essential function of a trade mark to denote (see the comments of Aickin J. in Pioneer Kabushiki Kaisha v. Registrar of Trade Marks [1977] HCA 56; (1977) 137 CLR 670 at 683) is a connexion which is broken by the retail sale of the goods and their use. When they re-enter the market as second-hand goods, although their source in the sense of their ultimate origin remains the same, a new origin has been interposed, and the goods have entered upon a new commercial existence. This is so whether the first sale was local or overseas. There has been created a new connexion in the course of trade, which is now the relevant one.

17. These considerations, deriving from the history and the fundamental nature of trade marks, provide a context within which s. 62 must be read. Just as in Deputy Federal Commissioner of Taxation for the State of South Australia v. Ellis & Clark Limited [1934] HCA 54; (1934) 52 CLR 85 at 94 Dixon J. found an "evident intention" which confined the unqualified language of the sales tax legislation in a way that prevented its application to sales at second-hand, so here I think the unqualified language of s. 62 must be read subject to the evident intention of the Trade Marks Act. The language of Dixon J. in that case is applicable: to read s. 62 literally would be to "ignore the whole scheme of legislation".

18. There is remarkably little authority expressly on the question which I have been discussing. I think this is because no one has sought to curtail the ordinary commercial operations of second-hand dealers by reference to trade marks legislation. Doubtless, in the present case, the applicant was provoked by the admitted fact that the trade in used guitars was made a cloak for the evasion of whatever rights the applicant has in respect of new guitars. But there are cases which are relevant. In The General Electric Company Limited v. Pryce's Stores (1933) 50 RPC 232 Maugham J. (as he then was) dealt with an attempt to restrain the sale of second-hand electric lamps. It is apparent from the report that the real point of the case was the plaintiff's allegation that the second-hand lamps were sold as new lamps. Although the lamps were sold under their trade mark names, "Osram" and "Mazda", Maugham J. had no hesitation in dismissing the actions upon being satisfied that the lamps were sold as used lamps and not as new lamps. In the more recent case Rolls-Royce Motors Ltd v. Zanelli (1979) RPC 148, Browne-Wilkinson J. granted an interlocutory injunction to restrain the defendant from a proposed business of buying second-hand Rolls Royce Silver Shadow motor cars and converting their body work to make them look like four door versions of the more expensive Rolls Royce Corniche motor cars, which he proposed to sell under the name Rolls Royce Panache. The defendant's enterprising project would have produced a new product, deceptively modelled on a product of the plaintiff, which would have been sold under an impudently evocative variation of the plaintiff's trade mark. The judge's view that this would prima facie constitute an infringement, so as to attract the principles relating to the grant of an interlocutory injunction, is easy to understand. However, when the matter went on appeal, it was decided upon the principles of passing off, with some reference to breach of copyright in respect of drawings: see the report cited at 152-154. The Court of Appeal did not mention the trade marks question. For completeness, reference should also be made to Kerly, sec. 16-28, and the cases there noted, which it is unnecessary to discuss here.

19. A distinction could, of course, be drawn between second-hand goods purchased new from, or from a vendor supplied by, the registered proprietor of the mark in Australia, on the one hand, and on the other, second-hand goods purchased overseas, so as to have no flavour of original connexion with the Australian proprietor. But I do not think the Act contemplates such a distinction, which would be very inconvenient in practice. How would a second-hand dealer know whether he was infringing or not? In any case, even imported second-hand guitars are quite different goods from the new guitars distributed by the applicant under its trade mark. The sale of imported second-hand Fender guitars, together with other makes of second-hand guitars, is not deceptive and does not impinge on the goodwill to which the applicant's trade mark is related. Such a sale, to borrow the language of Smithers J. in the Atari and Futuretronics case (ubi supra), is "not 'using' the mark in the relevant sense". As Kitto J. said in The Shell Company of Australia Limited v. Esso Standard Oil (Australia) Limited [1963] HCA 66; (1963) 109 CLR 407 at 422: "it is implied both in s. 58(1) and in s. 62(1) that the use which is there referred to is limited to a use of a mark as a trade mark." A person who sells used goods, though by reference to a name they bore as a mark when sold new, does not by doing so represent that there is any connexion in trade between him and the manufacturer or original distributor of the goods, nor that any goods so marked are wearing his badge. (Cf. Shell case at 425.) Nor does he represent that there is any connexion in trade between the goods, in their character of used goods, and the registered proprietor of the mark. (Cf. the Champagne Heidsieck case, where Clauson J. said that "the exclusive right to use the mark conferred on the registered proprietor ... is the right to use the mark as a trade mark - i.e., as indicating that the goods upon which it is placed are his goods and to exclude others from selling under the mark wares which are not his.") It would be an unwarranted extension of the protection offered by the Trade Marks Act, and an undue restriction of the freedom of trade, to construe s. 62 as concerned with an importation and sale of used guitars.

20. Accordingly, so far as the questions in this case concern genuinely second-hand guitars, the applicant fails. The view I have taken makes it unnecessary to pursue the respondent's submission (already noted) that guitars manufactured (I think the point really related to guitars first sold) before 10 September 1987 were in any case immune from the applicant's suit.

21. There remains for consideration the question relating to the applicant's claim against Mr Bevk of infringement by the importation and sale in Australia of new guitars purchased in retail shops in the United States. As is pointed out by Ladas, op. cit. vol. II 1341, a consideration of this problem should not lose sight of the essential nature of a trade mark. That learned author says:

"Trademarks have their origin in the tort of

passing-off or unfair competition (it is of

course unnecessary here to debate the latter

expression to which Australian authority gives

a limited scope - see Moorgate Tobacco Co.

Limited v. Philip Morris Limited (No. 2)

[1984] HCA 73; (1984) 156 CLR 414), that is, in the

fundamental rule that no man has the right to

put his goods up for sale as the goods of

another person. This is the function of the

trademark: to identify a product and

distinguish it from other products of the same

nature."

But beneath the deceptively clear surface of this proposition lie turbulent cross currents of decision. The commercial and legal complexities which arise when the owner of a trade mark in respect of goods imported into a country alleges infringement by virtue of parallel imports are exhaustively analysed by Ladas in the chapter cited at the beginning of these reasons. A number of distinct situations may arise, not all of which it is necessary to deal with here.

22. In the first place, there may be set to one side the situation of the one entity producing the goods and owning the trade mark in a foreign country, where it sells some of the goods, while it exports identical goods to Australia, being also the registered proprietor of the trade mark in Australia. In such a case, it has been held that the registered proprietor cannot succeed in a claim for infringement brought against a parallel importer, since the goods are genuine goods upon which his mark was properly used, having been placed there as a badge of origin by the complainant himself: Champagne Heidsieck case (supra); Atari and Futuretronics case (supra); R. & A. Bailey & Co. Ltd v. Boccaccio Pty Ltd (1986) 77 ALR 177. The situation may not be different where the proprietor of the trade mark in Australia has appointed a registered user, as it has been said the registered user could only enforce claims which the registered proprietor could enforce: Delphic Wholesalers Pty Ltd v. Elco Food Co. Pty Ltd (1987) 8 IPR 545. But see the comment of Estey J., speaking for the Supreme Court of Canada, in Consumers Distributing Co. Ltd v. Seiko Time Canada Ltd (1984) 10 DLR (4th) 161 at 184, which suggests that a registered user may possibly be able to maintain a claim for infringement in such a case under the Trade Marks Act of Canada. However, where the goods the subject of the parallel importation are not identical with the goods distributed by the owner of the Australian mark, different questions may arise, which are discussed below. For that reason, some of the statements in the authorities referred to may be found to require some qualification. At this point, I merely note the considerations which are detailed in the article in (1984) 7 UNSWLJ (previously referred to) at 131.

23. A distinction is to be made where, although the manufacturer abroad is the registered proprietor of the mark under which the goods are sold in Australia, that mark is different from the mark under which he sells overseas. If, in such a case, a parallel importer purchases the genuine goods sold under the overseas mark, imports them into Australia, and sells them here under the Australian mark, the genuineness of the product and its identity with that sold by the registered proprietor in Australia will not avoid infringement: Wellcome Foundation Ltd v. Secretary of State for Social Services (1988) 1 WLR 635 at 638.

24. A special rule has been claimed to apply (see, for example, Kerly sec. 14-30) to the parallel importation of goods, bearing a particular trade mark, where the goods were originally marketed by some branch overseas of an international enterprise (consisting of a group of companies) of which the Australian registered proprietor is a member. It is said in such a case the courts regard the use of the mark as having the consent of the registered proprietor, who is accordingly disabled from suing for infringement. The leading case cited for this proposition is the Revlon case (supra). However, Foster J. has pointed out (see Chanel Ltd v. F.W. Woolworth & Co. Ltd (1981) 1 WLR 485 at 490) that in the Revlon case the English company which sued unsuccessfully was not the registered holder of the trade mark, that the right of user of the mark by the English company was limited to last only so long as both it and the registered proprietor should be controlled by the holding company of the entire international group of companies, and that all the products sold under the trade mark bore also the endorsement: "Revlon, New York, Paris and London" - an endorsement which denied that the mark signified an English origin of the goods. Accordingly, the Revlon case dealt with a very special situation, which cannot be assumed to be generally typical of the arrangements of international groups involved in disputes concerning parallel imports. In the Chanel case, which was appealed to the Court of Appeal, at 491 Buckley L.J. summarized the circumstances of the Revlon case. He said:

"In that case the plaintiff companies formed

part of a group of companies in which all save

the parent company were wholly owned

subsidiaries, or wholly owned

sub-subsidiaries, of that parent company. The

plaintiff company sued for passing-off Revlon

goods manufactured in the United States of

America by a Revlon company operating in the

United States as Revlon goods manufactured in

the United Kingdom by another Revlon company

operating in the United Kingdom. This court

held that the marks, or get-up, in that case

had been developed as a house mark distinctive

of the whole group and that every company in

the group must be taken to have consented to

the mark's being used by every other company

of the group to designate the products so

marked as products of the group as a whole."

25. When it is appreciated that the registered proprietor of the mark in the Revlon case (as appears from the report of that case at 104) carried on no trade, having only the function of holding trade marks, the importance of each of the matters to which Foster J. drew attention is plain. The conclusion that the mark was a house mark was not drawn by reason simply of the fact that the corporations were members of the one group, nor would it have been proper to have drawn that conclusion simply upon such a basis: Farmer & Co. Limited v. Anthony Hordern & Sons Limited [1964] HCA 58; (1964) 112 CLR 163 at 167-168. In the Revlon case, Buckley LJ. at 102-103 drew attention to the fact that there was nothing to show the products sold by the plaintiffs themselves in the United Kingdom, under the trade marks, were sold as products of the registered users of the mark. (Nor, of course, was there any question of the building up of a separate goodwill through warranty repairs and servicing, the goods being shampoos.) Buckley L.J. said:

"On the contrary it appears to me that the mark

used in conjunction with a reference to New

York, Paris and London is a signal that the

goods are of a kind dealt in in the course of

a business carried on in the United States and

France as well as in the United Kingdom. It

is a signal that the goods are goods of a kind

dealt in by some concern or group which

carries on its business at any rate in those

three countries. (The United Kingdom

companies) do not manufacture or trade in the

United States; so they cannot alone constitute

the concern or group in question."

With reference to the parallel imports from the United States, and the mark which had been placed on them there, he added:

"In my judgment, the sale of the United States

products in question in this country under

that mark involves no more than a

representation that those products are goods

of the Revlon Group, as indeed they are. I

consequently agree with the learned judge that

the use of the mark in the United Kingdom on

the United States products in question

involves no misrepresentation of their

commercial origin."

This was said with reference to the claim of passing off, but when he turned to the trade marks point he said at 106-107:

"(T)he mark has become in effect a 'house mark

of the whole group'. It has at all material

times been intended for use, and has been

used, to indicate that the goods to which it

is applied are goods which originate from the

Revlon Group, but not from any particular part

of that Group. The exploitation of the mark

and of the goods to which it relates is a

world-wide exercise in which all the component

companies of the Group who deal in these

particular products are engaged in the course

of trade. This view is, I think, reinforced

by the condition attached to the registration

of (the United Kingdom manufacturer) as a

registered user of the mark. In these

circumstances it seems right to say that the

United States products in question are goods

connected in the course of trade with (the

United Kingdom manufacturer)."

It was in the situation so explained that the conclusion was drawn that the proprietor and registered user of the trade mark had "impliedly consented to the use of the trade mark" within section 4(3)(a) of the Trade Marks Act 1938 (UK). As Buckley L.J. said at 106:

"In these circumstances it seems to me that

every company in the Group must be taken to

have concurred in, and consented to, the

REVLON FLEX mark being used as a group mark to

designate the products upon which it is put as

products of the Revlon Group."

26. Neither the examination of the Revlon case in the Chanel case, nor the judgment of Buckley L.J. in the Revlon case itself, suggests that the conclusion of consent followed simply from the fact of sale by the overseas manufacturer without restriction upon export to the United Kingdom. The conclusion rather followed from that sale by a member of a group of the very special nature described, which marketed the product as a group product. To derive an implied consent to the use of the Australian mark simply from the fact of sale overseas without a territorial restriction upon resale would seem contrary to the reasoning of the High Court in the copyright case Interstate Parcel Express Co. Proprietary Limited v. Time-Life International (Nederlands) B.V. [1977] HCA 52; (1977) 138 CLR 534, per Gibbs J. at 541, 543, per Stephen J. at 549-550, per Jacobs J. at 556; and also contrary to the reasoning of the Court of Appeal in another copyright case, Polydor Limited v. Harlequin Record Shop (1980) 6 FSR 362 at 365-366. Both these decisions have been accepted in India by the High Court of Delhi: Penguin Books Limited v. India Book Distributors (1985) 11 FSR 120; and in New Zealand: Barson Computers (N.Z.) Ltd v. John Gilbert & Co. Ltd (1985) 11 FSR 489. See, too, Computermate Products (Aust) Pty Ltd v. Ozi-Soft Pty Ltd (1988) 83 ALR 492 (special leave refused 12 May 1989).

27. It has been suggested (Ricketson, op. cit. at 708; article (1984) 7 UNSWLJ at 122) that the defence of consent, on which the decision in the Revlon case is founded, would not apply in Australia. This is because s. 4(3)(a) has no counterpart in the Australian Act. However, McGarvie J. held to the contrary in the Delphic case (supra) at 557, and I respectfully agree with his view. See also Shanahan, op. cit. at 395.

28. Both the Champagne Heidsieck case (supra) and the Revlon case were distinguished in Wilkinson Sword Ltd v. Cripps & Lee Ltd (1982) 8 FSR 16, where razor blades manufactured by the United Kingdom trade mark proprietor and marked with its trade mark, intended for sale in the United Kingdom, were of superior quality to razor blades marketed by it under the same trade mark overseas. Parallel imports of the overseas blades were restrained as involving passing off. Falconer J. pointed out at 26 that no similar inferiority of the parallel imports was revealed by the circumstances proved in the Revlon case. In a trade marks case, too, Castrol Limited v. Automotive Oil Supplies Limited (1983) RPC 315, the Revlon case was distinguished. Again there was evidence of inferiority of the parallel imports; and there was also evidence of an express statement, made in connection with the overseas sales, that consent was not given to the export of the product from the overseas country. A third case of this kind is Colgate-Palmolive Limited v. Markwell Finance Limited (1988) RPC 283, where Falconer J. once more distinguished the Revlon case. The Colgate-Palmolive case concerned a parallel importation of a Brazilian tooth paste manufactured by an associated company of the proprietor of the United Kingdom trade mark. It was clear that, within the group of international companies concerned, no consent had been given to the export in question. There was involved a diversion to the United Kingdom of a cheap product, held to be unsuitable for the United Kingdom market, sold by the Brazilian associated company for export to Nigeria. These three cases highlight the practical and theoretical problems which would arise if the conclusion of consent were too readily drawn merely because of membership of the same group of companies. An aspect of the problem is well stated by Ladas, op. cit. at 1341:

"But the function of the trademark is to

identify and distinguish particular goods

possessing certain characteristics in

composition, ingredients, quality and the

like. The owner of the trademark, to satisfy

local requirements of the public's taste or

preferences or the requirements of a country's

health law or other legislation, may not put

on sale the identical goods in the two

separate countries in which he owns the

trademark. Indeed, the separate goodwills he

has acquired in the two countries may have

been built up to symbolize products having two

different sets of characteristics. In such

case importation of the product of one country

into the other may interfere with the very

function of the trademark by creating

confusion of the public as to the identity of

the goods and by injuring the separate

goodwill that the owner has in the latter

country."

29. That a relationship, although it involves some degree of control, between the overseas manufacturer and a local distributor may not lead to the same conclusion as that which was drawn upon the facts of the Revlon case is also confirmed by the care with which the Supreme Court of Canada, in the Seiko case (supra) at 163, 179 and 184, emphasized that a claim by the registered user of the trade mark had not been raised before it. Even within the Common Market, where the influence of article 85 of the Treaty of Rome should not be overlooked (there have been decisions based squarely on article 85 refusing relief against parallel importers in trade mark suits), the Court of Appeal of The Hague, in Jacobus Kadee v. Grundig (Nederland) NV (1965) 4 CMLR 40 at 48, held that a Dutch subsidiary of a German company was capable of having a wholly independent existence as distributor and as owner of the Grundig trade mark in the Netherlands, so as to enable it to rely on its trade mark to restrain parallel importations from West Germany.

30. In the present case, the applicant is not a subsidiary of the United States corporation. The tie between them is contractual. As an entity independently controlled, the applicant has built up its own goodwill, and it has been permitted to attain by assignment the position of registered proprietor of the trade mark. Protection of its rights under the mark would carry out the statutory purpose, for that purpose is to make effective the use of the mark by the registered proprietor to identify and distinguish goods connected in trade with it, and with its goodwill. Long standing authority in the United States supports this opinion: A. Bourjois & Company, Inc. v. Katzel [1923] USSC 26; (1923) 260 US 689. There, a French company carrying on business in France, and also in the United States, sold the goodwill of its United States business to the plaintiff, which obtained an assignment of the trade marks in the United States. The plaintiff afterwards imported face powder made by the French company in France, selling it under the trade marks with an endorsement indicating that the face powder was made in France and packed in the United States by the plaintiff. Parallel imports of the same face powder purchased in France and bearing the French trade marks were restrained. O.W. Holmes J. delivered the judgment of the Supreme Court. He said at 691-692:

"We are of opinion that the plaintiff's rights

are infringed. After the sale the French

manufacturers could not have come to the

United States and have used their old marks in

competition with the plaintiff. That plainly

follows from the statute authorizing

assignments. ... Ownership of the goods does

not carry the right to sell them with a

specific mark. It does not necessarily carry

the right to sell them at all in a given place."

After referring to the analogy of patent law, he returned to the effect of a trade mark and said:

"It deals with a delicate matter that may be

of great value but that easily is destroyed,

and therefore should be protected with

corresponding care. It is said that the

trade mark here is that of the French house

and truly indicates the origin of the goods.

But that is not accurate. It is the trade

mark of the plaintiff only in the United

States and indicates in law, and, it is

found, by public understanding, that the

goods come from the plaintiff although not

made by it. ... It stakes the reputation of

the plaintiff upon the character of the goods."

31. The mark is, in this case, not affixed by the proprietor of the Australian mark (contrast the view of Templeman L.J. in the Revlon case, which even in the circumstances of that matter was rejected by the majority, as Falconer J. noted in the Colgate-Palmolive case (supra) at 317), nor is there any basis, of the kind shown in the Revlon case, for inferring that consent to its affixation was given by the proprietor of the Australian mark (cf. the Colgate-Palmolive case at 316). The applicant here, as registered proprietor, is in a stronger position than that of the registered user in the Colgate-Palmolive case, and a much stronger position than that of the registered user in the Revlon case, whose own use of the mark was as a group mark, and was subject to the dictation of the controlling company of the group (see Revlon case at 107). Here, the mark affixed to the guitars purchased by Mr Bevk in the United States was affixed, not as a trade mark under the Trade Marks Act 1955 with which the United States manufacturer had no concern, but as a trade mark in the United States under United States law. In that respect, the situation is similar to the situation in the Colgate-Palmolive case, as Falconer J. described it at 316.

32. This view has been taken, in a comparable case, in the Exchequer Court of Canada: Breck's Sporting Goods Co. Ltd. v. Magder (1971) 1 CPR (2d) 177. In that case, the plaintiff was registered in Canada by assignment as the proprietor of a trade mark (MEPPS) for fishing tackle imported from France. The mark belonged in France to the French manufacturer, of the name of which it was an acronym. Gibson J. at 183-4 held that "the Canadian trade mark MEPPS distinguished within the meaning of (the relevant Canadian section) the lures sold in Canada by the plaintiff company (manufactured in France) from the lures of others", and continued:

"In my view, it is sufficient that the

origin in Canada of these lures be

established. The fact that the origin of

manufacture in France of the lures was known

by some persons in Canada in this case, is

irrelevant, in that this is a claim in respect

to a trade mark used only in selling wares in

Canada.

. . .

It follows that lures manufactured in

France having upon them the French trade mark

which is practically identical with the

Canadian trade mark cannot be imported for

sale into Canada as the defendants have done

without infringing the plaintiff's Canadian

trade mark."

33. In my opinion, the Bourjois case and the Breck's Sporting Goods case state the law as it is in Australia. That law cannot be evaded by the device of a purported second-hand sale, where the reality is a dealing which infringes the applicant's mark. When Mr Bevk purchased new guitars from retail shops in the United States, imported them into Australia, and sold them, or distributed them for sale, so far as concerns the issues raised by the preliminary questions, he infringed the applicant's trade mark: W.D. & H.O. Wills case (supra) at 188; Pioneer K.K. case (supra) at 688.

34. The questions should be answered as indicated by these reasons. I direct the applicant to bring in short minutes accordingly, on a date to be fixed, when I shall also hear the parties as to the appropriate orders in respect of costs.