Section 120 - Is there use as a trade mark by Trojan that is prima facie an infringement?
40 In order to appreciate fully the issues as to use, it is helpful to have regard to a representative example of the package. Annexed are pages 92 and 93 from Mr Garcia's affidavit. Page 92 contains a photograph of the front of exhibits C2 and C1 being, respectively, the authorised and the Trojan packaging; and page 93 contains a photograph of the back of exhibit C1 (the Trojan pack) showing the information concerning the distributor, Trojan.
41 It is unnecessary to set out the terms of the plain packaging legislation. It suffices to say that with some care and precision, it requires retail packaging of tobacco products to comply with the TPP Act and TPP Regulations. It does so not just by proscribing things, but also by prescribing things. Section 18 of the TPP Act deals with the physical features of retail packaging. Some examples are that there must be no decorated ridges, embossing etc: s 18(1)(a); glue must not be coloured: s 18(1)(b); the pack must be cardboard, rectangular without rounding or bevelling, with straight edges: s 18(2); the pack must have certain dimensions, with a flip top lid with straight edges: s 18(3). Section 19 deals with colour and finish of retail packaging. All outer and inner surfaces and the lining of the pack must be of matt finish and in "drab dark brown", except the health warnings and the text of the brand, business or company name or variant name. Section 20 prohibits trade marks and marks generally appearing on retail packaging. Except as provided by s 20(3), no trade mark may appear anywhere on the retail packaging of tobacco products: s 20(1) of the TPP Act. Also except as provided by s 20(3), no mark (defined as including any line, letters, numbers, symbol, graphic or image) may appear on any retail packaging of tobacco products: s 20(2). By s 20(3), the following may appear on the retail packaging of tobacco products:
(a) the brand, business or company name for the tobacco products, and any variant name for the tobacco products;
(b) the relevant legislative requirements;
(c) any other trade mark or mark permitted by the regulations.
42 The TPP Regulations have detailed provisions concerning the form and placement of health warnings and the graphic pictures of diseased teeth, gums, toes etc.
43 The trade marks in question here were thus permitted to be used on the front of the pack by the TPP Act and TPP Regulations. All the other markings on the packets were either required by the TPP Act and TPP Regulations or by State or Commonwealth legislation concerning detail such as distribution, place of manufacture, etc.
44 There was a dispute at the hearing as to whether Trojan could have put on the packet "Dutch cigars" or some similar anodyne phrase. It is to be noted that "Gran Corona", not a trade mark, appears. It is unnecessary to resolve this dispute.
45 The above is the context of the use of the trade marks.
46 A "trade mark" is defined in s 17 of the Act as "…a sign used, or intended to be used, to distinguish goods…dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person." The function or essential characteristics of a trade mark is to distinguish goods of the registered owner from the goods of others and indicate a connection in the course of trade between the goods and the registered owner: see E & J Gallo Winery v Lion Nathan Australia Pty Ltd [2010] HCA 15; 241 CLR 144 at 162-163 [42].
47 Upon registration of the trade marks, STG Eersel was conferred with "exclusive rights" to either "use the trade mark" (s 20(1)(a)) or "to authorise other persons to use the trade mark" (s 20(1)(b)) in relation to the goods or services in respect of which the trade mark is registered. There was no allegation here of Trojan infringing the trade mark by using the trade marks "in relation to services". Rather, it is the use of the trade mark in relation to the imported products that is at issue.
48 Section 120(1) of the Act is in the following terms:
A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered.
49 "Use of a trade mark" in relation to goods is defined in s 7(4):
In this Act:
"use of a trade mark in relation to goods " means use of the trade mark upon, or in physical or other relation to, the goods (including second-hand goods).
(Emphasis retained)
50 "Use" so defined captures inter alia, use of the trade mark on packaging, signage, advertising or promotional items, as well as on price lists and correspondence: see Optical 88 Ltd v Optical 88 Pty Ltd (No 2) [2010] FCA 1380; 275 ALR 526 at 553 [141]; The Shell Company of Australia Ltd v Esso Standard Oil (Australia) Ltd [1963] HCA 66; 109 CLR 407 at 422; Thunderbird Products Corporation v Thunderbird Marine Products Pty Ltd [1974] HCA 51; 131 CLR 592 at 600; Angoves Pty Ltd v Johnson [1982] FCA 119; 43 ALR 349 at 359-360.
51 As the Full Court noted in Coca-Cola Co v All-Fect Distributors Ltd [1999] FCA 1721; 96 FCR 107 at 115 [19] (Black CJ, Sundberg and Finkelstein JJ), s 120 expressly incorporates the requirement that the "use" be a use "as a trade mark", whereas the repealed 1955 Act did not expressly stipulate as such; but in Shell Co v Esso Standard Oil 109 CLR 407 at 422-424 it was said to be implied in both s 58(1) and s 62(1) of the 1955 Act that the "use" there referred to is limited to use "as a trade mark". See also Johnson & Johnson Australia Pty Limited v Sterling Pharmaceuticals Pty Limited [1991] FCA 402; 30 FCR 326 at 333-334, 342-343 and 347-349.
52 Use as a trade mark means:
use of the mark as a "badge of origin" in the sense that it indicates a connection in the course of trade between goods and the person who applies the mark to the goods:see Johnson & Johnson Aust Pty Ltd v Sterling Pharmaceuticals Pty Ltd [1991] FCA 310; (1991) 30 FCR 326 at 341, 351. That is the concept embodied in the definition of "trade mark" in s 17 - a sign used to distinguish goods dealt with in the course of trade by a person from goods so dealt with by someone else.
See Coca-Cola v All-Fect Distributors 96 FCR at 115 [19] expressly approved by French CJ, Gummow, Crennan and Bell JJ in E & J Gallo Winery v Lion Nathan Australia 241 CLR at 163 [43].
53 Trojan accepted that the use of the trade marks was to act as a badge of origin in the sense discussed in cases such as Mark Foy's Ltd v Davis Coop & Co Ltd [1956] HCA 41; 95 CLR 190 at 204-205; the Shell Case at 425, Johnson & Johnson at 347-348, 351; Wingate Marketing Pty Ltd v Levi Strauss & Co [1994] FCA 163; 49 FCR 89 at 134-145; and Musitor BV v Tansing [1994] FCA 541; 52 FCR 363 at 372. Thus, it accepted that there was "use as a trade mark". It argued, however, that the use was not by it, but by STG Eersel. This was so, it was submitted, because the connection in trade was between the goods and the manufacturer, not between the goods and Trojan. In this respect, Trojan referred to and relied in particular on what Gummow J said in Wingate Marketing v Levi Strauss 49 FCR at 134-135; and Smithers J in Atari Inc v Fairstar Electronics Pty Ltd (1982) 50 ALR 274 at 277.
54 Trojan's argument had echoes of the debates and disagreements before 1995 about parallel importing simpliciter, if I may use that expression. Under the repealed 1955 Act, the legislation did not contain separate defences for "parallel importers" (cf s 123 under the current Act as discussed below). The only relevant question was whether the trade mark had been infringed under s 62 of the 1955 Act. Under that provision, the "exhaustion of rights" doctrine propounded by Clauson J in Champagne Heidsieck et cie Monopole Society Anonyme v Buxton [1930] 1 Ch 330 was often raised as a defence to trade marks infringement by parallel importers: see R & A Bailey & Co Ltd v Boccaccio Pty Ltd and Others; R & A Bailey & Co Ltd v Pacific Wine Co Pty Ltd (1986) 4 NSWLR 701 and Atari Inc and Futuretronics Australia Pty Ltd v Fairstar Electronics Pty Ltd 50 ALR 274, see below.
55 In Champagne Heidsieck, the defendant sought to import wine into England which had been manufactured by the plaintiff specifically (being a sweeter variant) for the French market. The plaintiff argued that pursuant to the Trade Marks Registration Act 1875 (UK) (1875 Act (UK)) and repealing provisions in the Trade Marks Act 1905 (UK) (1905 Act (UK)) that the legislation (at 338):
…had the further effect of vesting in the owner the right to object to any person selling or dealing with the goods produced by the owner of the trade mark with the trade mark affixed, except on such terms and subject to such conditions as resale, price, area of market, and so forth, as the owner of the trade mark might choose to impose.
56 Relevantly the definition in s 3 in the 1905 Act (UK) provided:
A "trade mark" shall mean a mark used or proposed to be used upon or in connexion with goods for the purpose of indicating that they are the goods of the proprietor of such trade mark by virtue of manufacture, selection, certification, dealing with or offering for sale.
57 The common law position prior to the introduction of statutes was to "prevent others from selling wares which are not his marked with that trade mark in order to mislead the public and so incidentally injure the person who is the owner of the trade mark": Farina v Silverlock (1856) 6 De G M & G 214 at 217; 43 ER 1214 at 1216 per Lord Cranworth. Thus, in effect the argument was that the nature of a trade mark had fundamentally changed from one being a badge of origin to a badge of control, and that the registered owner had the right to full control over the goods, except in cases where consent, whether expressed or implied, had been given to release the control. Clauson J refused to accept that the language of the 1875 Act (UK) and the 1905 Act (UK) "operated to extend the rights of the proprietor of a trade mark from a right to prevent deception as to the origin of goods into a right to control dealings with the goods" (at [340]). His Lordship went on to hold at 341 by reference to Kerly on Trade Marks:
[T]he use of a mark by the defendant which is relied on as an infringement must be a use upon goods which are not the genuine goods, i.e., Those upon which the plaintiffs' mark is properly used, for anyone may use the plaintiffs' mark on the plaintiffs' goods, since that cannot cause the deception which is the test of infringement.
58 In Revlon Inc v Cripps & Lee Ltd [1980] FSR 85 the English Court of Appeal subsequently cited Champagne Heidsieck with approval (see 115), although, the decision ultimately was one based on a finding of implied consent upon piercing the corporate veil between the two registered owners of the trade marks (see 116 and 117) in the United Kingdom and United States, and where consent was a valid defence under s 4(3)(a) of the Trade Marks Act 1938 (UK) then in force.
59 Champagne Heidsieck was considered under the 1955 Act in Atari Inc v Dick Smith Electronics Pty Ltd (1980) 33 ALR 20, by Starke J. His Honour considered whether the plaintiff was entitled to an interlocutory injunction against the defendant dealing with genuine goods, which were identical and where the goods bore the trade mark not as a forgery but because they had been imported in that form. Starke J refused to apply Champagne Heidsieck on the basis that there were differences in the English and Australian definitions of "trade mark", the former being concerned with "indicating that they are the goods of the proprietor of the trade mark" (under s 3 of the 1905 Act (UK)) , whereas the latter was expressly concerned with "connexion in the course of trade between the goods and a person who has the right either as a proprietor or as a registered user to use the mark" (under s 6 of the 1955 Act) (at pages 22-23).
60 In Atari Inc and Futuretronics Australia Pty Ltd v Fairstar Electronics Pty Ltd (1982) 50 ALR 274, Smithers J dealt with substantially identical facts as those before Starke J, again dealing with genuine goods, to which the trade mark had already been applied by the registered owner. Smithers J expressly declined to follow Starke J and held that Clauson J's proposition in Champagne Heidsieck as to the description of the "fundamental nature" of a trade mark was correct, in interpreting s 62 of the 1955 Act as to whether the defendant had "used" the mark in an infringing way (at 277) :
…once a manufacturer puts a trade mark on his goods and sends them into the course of trade on the billowing ocean on trade, wherever people bona fide deal with those goods under that name and by reference to that trade mark, not telling any lies or misleading anyone in any way at all, they are simply not infringing the trade mark. They are not 'using' the trade mark in the relevant sense. The Act is to be read by considerations such as these and these must be the considerations which ultimately support the Champagne case.
61 In R & A Bailey & Co Ltd v Pacific Wine Co Pty Ltd, Young J considered whether the plaintiff's (manufacturer of Baileys Original Irish Cream) registered trade mark had been infringed by an unauthorised parallel importer of the same product but originally destined as apparent on the labelling, for retail sale in Holland. Central to the defendant's submission was that a registered proprietor's rights are virtually exhausted once the mark is affixed to the genuine goods, and subsequently sold, wherever the product was pre-destined. In his Honour's view, a contrary finding would have been to give effect to trade marks being a badge of control, and as a corollary, accepting the so called "territorial" theory pressed by the plaintiffs. In acceding to the defendant's submission, his Honour expressly approved Champagne Heidsieck and Atari v Fairstar 50 ALR 274 for the proposition that (at 707) :
… [It] rejects a construction of the Trade Marks Act which would change the nature of the mark from a badge of origin to a badge of control and also rejects the view that a remarkable alteration in the concept of a trade mark took place when trade marks became statutory.
62 Young J held that "a right to exclusive use" conferred by s 58 of the 1955 Act (equivalent to now s 20 of the TM Act) upon the registered owner to the trade mark in relation to goods only operated to prevent the sale in Australia of goods which are not the proprietor's but which are marked with the proprietor's mark. The right did not enable the registered proprietor to prevent the sale in Australia of its goods marked with its mark, even though it had projected the goods, as the labels indicated, into the Dutch market and not into the Australian market. Young J's decision in Bailey was approved in Delphic Wholesalers Pty Ltd v Elco Food Co Pty Ltd (1987) 8 IPR 545 by McGarvie J in the Supreme Court of Victoria.
63 In Wingate 49 FCR 89 the appellant imported second-hand clothing bearing the respondent's trade mark "LEVI'S", which were subsequently treated or altered in various ways, and sold under the trade mark "REVISE" in addition to the extant "LEVI'S" mark. Gummow J allowed the appeal (with the plurality, Sheppard J and Wilcox J concurring) in so far as it related to the issue of the appearance of the respondent's trade mark on jeans that had been substantially altered. After framing the essential question for infringement as per the Full Court in Johnson & Johnson Australia Pty Ltd v Sterling Pharmaceuticals Pty Ltd 30 FCR at 347, his Honour said (49 FCR at 135):
In testing the question of infringement, it is proper to have regard to the very goods in question in their condition at the time of the allegedly infringing acts. The continued appearance of the Levi Strauss marks upon the goods as sold by Wingate, after what one might call their conditioning, is an illustration of the class of case referred to by Viscount Maugham in the quotation set out above from Aristoc Ltd v Rysta Ltd. Namely, these marks were intended by the manufacturer to indicate origin and thus indicate a character or quality of the goods. This may be displaced having regard to the degree of change wrought by the activities of Wingate.
….. The Levi Strauss trade marks appear on the goods not for the purpose of indicating or so as to indicate a connection between the garments and Wingate…but to indicate by comparison or contrast the origin of the goods. That is the purpose and nature of the alleged trade mark use by Wingate of the Levi Strauss trade marks. Use of that character is not a trade mark use: CF Irving's Yeast-Vite Ltd v Horsenail (1934) RPC 110.
(emphasis added)
Part of the above passage is also relevant for Trojan's argument about s 122(1)(b). For present purposes its importance is its standing as one of these cases which identify infringing use as a trade mark as requiring a purpose of connection between the goods and someone other than the registered owner.
64 Notwithstanding this line of authority, various obiter statements from the High Court in "non-use" cases suggested that use by a retailer of imported goods would prima facie constitute a use of the trade mark, contrary to the exclusive rights conferred under s 58: see Pioneer Kabushiki Kaisha v Registrar of Trade Marks [1977] HCA 56; 137 CLR 670 at 688; W D & H O Wills (Australia) Ltd v Rothman Ltd [1956] HCA 15; 94 CLR 182 at 188 (see also Estex Clothing Manufacturers Pty Ltd v Ellis & Goldstein Ltd [1967] HCA 51; 116 CLR 254), because a trade mark remains "in the course of trade" as long as it is sold under the trade mark, whether it is with or without the knowledge of the registered owner.
65 Prior to the introduction of the Act, a working party considering the proposed legislative changes were largely in favour of parallel importing (see Working Party to Review the Trade Marks Legislation, Recommended Changes to the Australian Trade Marks Legislation (Australian Government Publication Service, 1992 at 76)). Section 123 was introduced into the Act at least in part in order to deal with parallel importing. However, the legislature did not fully embrace the draft provision proposed by the Working Party. Subsequent reports also recommended further changes to the Act in favour of parallel importing, but no such changes have been accepted by the Parliament. (See Intellectual Property and Competition Review Committee, Parliament of Australia, Review of Intellectual Property Legislation under the Competition Principles Agreement: Final Report to Senator the Hon Nicholas Minchin, Minister for Industry, Science and Resources and the Hon Daryl Williams AM QC MP Attorney-General (2000) 188.)
66 The notion that there is infringing use as a trade mark by dealing in goods bearing the mark in circumstances that indicate a connection between the goods and the registered owner has a degree of counter-intuitiveness. The High Court in E & J Gallo Winery 241 CLR 144, did not deal with submissions relying on Champagne Heidsieck that an importer (Beach Avenue) was not using the trade mark as a trade mark, and as a corollary, an argument that it must lead to the necessary conclusion that the registered owner (Gallo) had "used" the trade mark in the non-use context - an argument in respect of which Gallo had succeeded before the Full Court: see E & J Gallo Winery v Lion Nathan Australia Pty Ltd [2009] FCAFC 27; 175 FCR 386 at 403-404 [57]-[58]. The decision of the plurality in the High Court was expressed to be based on a different ground and "the only relevant question" (at [53]) being whether Gallo had used the trade mark under s 17.
67 It is, however, not for me to question the proposition that absent s 123 being engaged, the mere sale of goods already marked by the registered owner (a fortiori if a mark is applied by someone other than the registered owner) would be an infringing use of the mark by the importer. Four Full Courts can be seen so to have said in the context of the Act: Transport Tyre Sales Pty Ltd v Montana Tyres Rims & Tubes Pty Ltd [1999] FCA 329; 93 FCR 421 at 440 [94]; Paul's Retail Pty Ltd v Sporte Leisure Pty Ltd [2012] FCAFC 51; 202 FCR 286 at 295 [66]; Paul's Retail Pty Ltd v Lonsdale Australia Limited [2012] FCAFC 130; 294 ALR 72 at 82 [65]; and Gallo 175 FCR at 403-404 [57]-[58].
68 Under the newly introduced Act, the Full Court in Transport Tyre Sales Pty Ltd v Montana Tyres Rims & Tubes Pty Ltd 93 FCR at 440 [94] held that if a parallel importer imports and offers to sell, and sells genuine tyres manufactured overseas by a registered owner of the trade marks and advertises under those trade marks, it would constitute a use "as a trade mark" under s 120 unless s 123 applied: see also Paul's Retail Pty Ltd v Sporte Leisure Pty Ltd 202 FCR at 295 [66] and Paul's Retail Pty Ltd v Lonsdale Australia Ltd 294 ALR 72. In reaching that view in Montana, the Full Court did not find the need to mention Champagne Heidsieck in its reasons.
69 In Paul's Retail v Sporte Leisure 202 FCR 286, the Full Court rejected leave for the appellant to withdraw a concession made at trial to raise the argument that in light of E & J Gallo Winery 241 CLR 144 there may be a subset of uses by a parallel importer that may not fall under s 120. Nevertheless, it discussed obiter that "it is most unlikely…that, as a matter of ordinary construction, the Act would leave open the application of the Champagne Heidsieck principle beyond its specific enshrinement under s 123". It then remarked that the High Court in Gallo did not disapprove of the view reached by the Full Court in E & J Gallo Winery v Lion Nathan Australia Pty Ltd 175 FCR at 404 [58] which had included the following, as noted by the Full Court in Paul's Retail 202 FCR at 295 [66]:
…As Branson J said in Parfums Christian Dior (Australia) Pty Limited v Dimmeys Stores Pty Limited (1997) 39 IPR 349 at 353-354, citing Revlon Inc v Cripps & Lee Ltd [1980] FSR 85, it is reasonably argued that the philosophical basis for the rule in Champagne is that the registered proprietor consents to the use of its trade mark in those circumstances. That is entirely consistent with the introduction in the 1995 Act of s 123. That section provides that a defence to infringement is that the mark was applied to the goods with the consent of the registered proprietor. That is to say, it is a statutory recognition that absent s 123 the mere sale by an importer of goods already marked would be an infringing use of the mark by the importer.
70 The Full Court in Paul's Retail v Lonsdale 294 ALR 72 also considered this point at [64]-[65], reaching the same view as the Full Court did in Paul's Retail v Sporte Leisure, and expressly approving E & J Gallo Winery v Lion Nathan Australia Pty Ltd 175 FCR at 403-404 [58] quoted in Paul's Retail v Sporte Leisure 202 FCR at 295 [66]. Their Honours continued at [66]:
In our respectful opinion, the view expressed by this Court in these decisions is correct. It is hardly surprising that there is no authority supporting the proposition that a trader in goods who imports and sells goods distinguished from other goods by a particular trade mark is not using the trade mark when he or she sells the goods in the course of trade. Where an importer of marked goods is a trader in, rather than a consumer of, marked goods, it is no more than an ordinary and natural use of language to say that the importer has used the mark in the course of its trade: See WD & HO Wills (Australia) Ltd v Rothmans Ltd (1956) 94 CLR 182 at 188; see also Pioneer Kabushiki Kaisha v Registrar of Trade Marks (1977) 137 CLR 670 at 688.
71 Further, if one necessarily accepts that the "exclusive rights" conferred upon registration of a trade mark to the registered owner under s 20 is a "distinct species of property rights", and "neither protection of goodwill nor deceptive conduct are the primary concern of the action for trademark infringement": see Wingate Marketing v Levi Strauss & Co 49 FCR at 118 then the "[t]he surest guide to the nature and extent of the proprietary right created by the registration of a trade mark under the Act is the text of the Act.": Paul's Retail v Lonsdale 294 ALR at 82-83 [67] and [68].
72 Here, the process of re-packaging involved applying the three trade marks in relation to the cigars (on the boxes containing them) for the purposes of s 9(1)(b)(i). That and the sale to the retailer was the use of the trade mark "upon, or in physical or other relation to, the goods": s 7(4). That is the exclusive right of the registered owner: s 20(1). Infringement falls to be assessed by s 120(1). For the reasons above, subject to the application of ss 123 and 122, there was infringement.