Trade mark use in Australia: foreign distributor found liable for infringement even where the first sale of its product was overseas.

Two companies incorporated in Hong Kong which were part of a corporate group which manufactured and distributed toys to exporters in China have each been found to have infringed trade marks registered in Australia when the products were subsequently exported and sold in retail outlets in Australia.

A notable issue in this decision ¹ is that this factual scenario gave rise to a finding that the overseas entities were found to have themselves ‘used’ the infringing trade mark for the purposes of the Trade Marks Act 1995 (Cth) (Act). This is so, notwithstanding that title to the products which carried the infringing trade mark had passed from the distributor to the exporter in China.

A key reason for this finding was that the Hong Kong entities were both held to have known that the products were being supplied in China for eventual sale in Australia.

An important, yet apparently unresolved question is whether, in the absence of this type of knowledge, the transaction which is described above, or others like it, would still result in a finding that the overseas manufacturer and distributor have ‘used’ the marks for the purposes of the Act, with the consequence that they would be left exposed to a potential trade mark infringement claim if another party had a relevant trade mark registration in Australia.

The applicant, Playgro Pty Ltd (Playgro), was a company incorporated in Australia which owned several trade mark registrations, including the following composite mark which was registered in respect of ‘games and playthings’ (Playgro Device Mark):

The respondents, Playgo Art & Craft Manufactory Limited of Hong Kong (Playgo Craft) and Playgo Toys Enterprises Limited (Playgo Enterprises), were members of a group of companies which designed, manufactured and distributed childrens toys and playthings in Hong Kong and China. Playgo Enterprises was responsible for the distribution and wholesale of the group’s products. Playgo Craft was the owner of the following registered trade mark in Hong Kong and China in respect of various goods, including toys (Playgo Device Mark):

Throughout 2013 and 2014, the Playgo corporate group manufactured toys in China, applied the Playgo Device Mark to the packaging on the toys, and supplied the toys to exporters operating out of the Chinese city of Shenzen. The Playgo Device Mark was applied to the products under the authorisation of Playgo Craft and the direction of Playgo Enterprises. Playgo Enterprises distributed the toys to the exporters. Under the respective agreements, title in the goods passed on being delivered to the appropriate exporter in China. The exporters then exported the toys to Myers and Woolworths, who sold the goods through their retail outlets in Australia.

Playgro asserted that, by the conduct described above, both Playgo entities had themselves infringed Playgro’s registered trade marks in Australia, including the Playgro Device Mark. In essence, the trade mark infringement claim was that the two Playgo entities had themselves ‘used’ a trade mark which was substantially identical or deceptively similar to Playgro’s registered marks in Australia, in contravention of section 120 of the Act.

Playgro also asserted that, if the Playgo entities’ conduct did not constitute trade mark infringement, such as by reason of not actually having ‘used’ the infringing trade marks in Australia for the purposes of the Act, they would nonetheless have been liable as joint tortfeasors to any trade mark infringement by the Australian retailers.

Were the Playgo trade marks substantially identical or deceptively similar to Playgro’s marks?

His Honour, Moshinsky J, first considered whether the Playgo Device Mark was substantially identical to Playgro’s registered trade marks. He noted that the visual appearance of the Playgo Device Mark, with a red background and white letters, ‘is distinct from the mark ‘PLAYGRO’, and the other Playgro trade marks.’ For this reason, on a side-by-side comparison, he did not consider them to be substantially identical.

In contrast, His Honour found that the Playgo Device Mark was deceptively similar to the Playgro Device Mark. An assessment of deceptive similarity involves considering all the surrounding circumstances, including which marks will be used, how the relevant goods will be bought and sold, and the character of the probable purchasers of the goods.² When compared both visually and orally, there must then be consideration as to whether the Playgo Device Mark, when compared to Playgro’s registered marks, is likely to deceive or cause confusion.

Taking into account the notional consumer’s imperfect recollection, his Honour provided the following reasons for establishing deceptive similarity:

• the first syllable ‘PLAY’ is identical in each mark
• the last syllable is visually and phonetically very similar and only differs by the letter ‘R’
• the marks, when considered as a whole, look and sound familiar.

His Honour went on to say:

The context includes the fact that people who purchase children’s toys include those who purchase them occasionally (for example, as presents for friends or family). Such purchasers may well have an imperfect recollection of the word mark ‘PLAYGRO’ or the Playgro device marks when they come to purchase a toy on another occasion… Given these matters, I consider there to be a real, tangible danger of confusion occurring; I think that a number of customers would be caused to wonder whether it might not be the case that the two products come from the same source.

In reaching his decision, Moshinsky J did not consider that the shape or colours of the Playgo Device Mark were sufficiently distinctive in preventing a real and tangible danger of causing confusion. Once reaching this conclusion, his Honour did not consider it necessary to compare Playgo’s Device Mark to Playgro’s registered word mark.

Were the Playgo entities themselves liable for infringement?

Having determined that Playgo’s Device Mark was deceptively similar to Playgro’s Device Mark, the next step in the analysis was to consider whether the Playgo entities had each ‘used’ the infringing trade mark for the purposes of section 120 of the Act. Section 120 requires that, for an infringement to occur, the alleged infringing sign (in this case, the Playgo Device Mark) must be ‘used’ as a trade mark in Australia.

The issue of whether an overseas entity is said to have ‘used’ a trade mark in the context of establishing ‘use’ in order to defeat a ‘non-use’ claim has been considered previously by the High Court in Estex.³ In this decision, the majority of the High Court found that, when considering ‘use’ in the context of a ‘non-use’ proceeding, ‘use’ is not confined to the physical use of the tangible object. Rather, when a manufacturer ‘projects’ the trade mark by means of displaying, offering, or selling to Australian retailers, use of the mark is attributed to that overseas manufacturer, even though title in the goods may pass overseas.

What is relevant is whether there is a connection in the course of trade between the goods and a person who has a right to use the mark.

In Estex, this factual scenario gave rise to the finding that the overseas manufacturer had used its marks for the purposes of the Act, and so it successfully defeated a ‘non-use’ claim brought against its registered marks in Australia.

In this most recent proceeding, Moschinsky J found no reason to limit this principle of ‘use’ to the context of a ‘non-use’ proceeding, and so applied the same principle to the context of an infringement proceeding.

His Honour therefore found that the Playgo entities did not cease to ‘use’ the infringing mark upon the sale and delivery of the goods in China, and the infringing mark continued to be used in the course of trade until their ultimate sale in Australia.

His Honour went on to find that it was to be inferred from the facts that the respondents were aware that their products were to be ultimately sold in Australia. His Honour’s finding therefore seemed to focus on the state of mind of the overseas corporate distributor. Importantly, Moschinsky J found it unnecessary to decide whether a foreign company would be liable for infringement of trade marks registered in Australia without this knowledge.

Joint tortfeasors

Although his Honour found that the Playgo entities had infringed on Playgro’s trade mark, he still considered the argument that Playgo would also have infringed on the basis of being a joint tortfeasor when Myer or Woolworths sold their goods.

A finding of being ‘joint tortfeasor’ at common law required a ‘common design by the respondents to participate in or induce or procure another person to commit an act of infringement.’⁴ This required that the alleged tortfeasor show some furtherance into carrying out this common design, and not merely having an agreement in place.⁵

In these circumstances, his Honour asserted that the facts did not suggest that Playgo and Myer engaged in a common design to offer for sale, and sell playthings with Playgo’s trade mark - it was merely a commercial relationship between a vendor and a purchaser. Despite knowing that their goods would be sold in Australia with their marks on them, this was insufficient, in his Honour’s opinion, to amount to a furtherance of a common design.

Comment

The finding that ‘use’ may have the same meaning under the Act in the context of both a non-use proceeding and an infringement proceeding has potentially profound consequences for any overseas manufacturer or distributor where their goods end up being sold in the Australian market.

While this decision seemed to turn on the factual finding that both the overseas entities were ‘aware’ that their products were to be sold in Australia, a more fundamental, and seemingly unanswered question is whether, in the absence of this type of knowledge, an overseas manufacturer or distributor could still be found to have ‘used’ potentially infringing marks for the purposes of the Act when their products are sold in the Australian market.

The answer to this seemingly fundamental question was not determined in this decision.

However, if ‘use’ for the purposes of determining a trade mark infringement claim has the same meaning under the Act as when assessing a non-use claim then it would seem to follow that an overseas manufacturer and distributor can be liable for a trade mark infringement claim in Australia without knowing that their goods are being sold in Australia.

This is because of the recent High Court decision in ⁶which considered the meaning of trade mark ‘use’ in the context of a ‘non use’ proceeding.

In Gallo, the High Court found that intention or knowledge of a sale in Australia by a trade mark owner which is overseas is not a necessary condition of establishing ‘use’ in order to defeat a non-use claim under the Act. In this case, a foreign owner of registered marks in Australia authorised the application of its trade mark on goods by a manufacturer in the foreign country.  The goods were then sold overseas, subsequently bought by an Australian company and then imported into Australia for retail without the knowledge of the foreign owner of the Australian registered mark.

The High Court found that this factual scenario was sufficient to establish that the foreign trade mark owner had used its trade mark in Australia, and so the non-use claim brought against its registered mark in Australia failed. The Court found that the lack of knowledge by the overseas trade mark owner of sales in Australia was not a relevant consideration.

In the Playgro decision, Moschinsky J found that the consideration given to the meaning of ‘use’ in Gallo did not appear to be limited to the context of non-use claims, but also seemed equally applicable to an infringement context.⁷

On this basis, and without further clarification on this issue, it is difficult to see how overseas manufacturers and distributors are not exposed to potential risks of trade mark infringement claims in Australia even when they are unaware that their goods are being sold in the Australian market by other parties and even where title in those goods has passed in overseas markets.

^{1 Playgro Pty Ltd v Playgo Art & Craft Manufactory Limited [2016] FCA 280.}

^{2 Southern Cross Refrigerating Company v Toowoomba Foundry Proprietary Limited (1953) 91 CLR 592.}

^{3Estex Clothing Manufacturers Pty Ltd v Ellis & Goldstein Ltd [1967] HCA 51.}

^{4 Universal Music Australia Pty Ltd v Cooper (2005) 150 FCR 1.}

^{5 Unilever plc v Chefaro Proprietaries Ltd [1994] FSR 135.}

^{6 E&J Gallo Winery v Lion Nathan Australia Pty Ltd (2010) 241 CLR 144.}

^{7 Playgro at [139]}