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Intellectual Property

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Focus: Trade Marks – Infringement – genuine products, counterfeit packaging and invoices

24 October 2007

In brief: In the recent case of Brother Industries Ltd v Dynamic Supplies Pty Ltd, the Federal Court of Australia considered an unusual set of facts and held that the importation and sale of non-branded products, manufactured by the trade mark owner but imported and sold in counterfeit packaging, constituted trade mark infringement, misleading and deceptive conduct in breach of the Trade Practices Act 1974 (Cth) and passing off. Partner David Yates and Law Graduate Louise Chau look at the relevance of the decision for trade mark owners concerned to prevent the importation and sale of counterfeit products in Australia.

How does it affect you?

Trade mark owners should be aware that:

  • importation of a counterfeit product that bears a sign identical to, substantially identical with, or deceptively similar to, a registered trade mark, amounts to an infringement of that trade mark; and
  • use of a sign on packaging and on invoices, but not on the product itself, amounts to use of the sign in relation to that product for the purpose of assessing trade mark infringement.

The facts

The applicants were the Japanese company Brother and its wholly owned Australian subsidiary. Brother owns the relevant Australian BROTHER trade marks and produces, among other things, a Brother-branded printer drum unit for use in a wide range of Brother machines, including laser printers, facsimiles and multi-function devices. Brother also produces a similar, non-branded, printer drum unit for a purchasing company (the name of which was confidential, and was referred to in the judgment as 'Company X') which then distributes or sells the units under another brand name or with no brand name at all. (The authors understand that this is not an uncommon practice of manufacturers.)

The respondent, Dynamic Supplies, is an Australian company that sourced its Brother products from a supplier in the United States unrelated to Brother. Brother made several trap purchases from Dynamic Supplies and discovered that the products were the non-branded printer drum units produced for Company X, but that they had been packaged with, and were accompanied by, invoices bearing the 'BROTHER' mark and that these were unauthorised by Brother.

The decision of the Federal Court

The court found that Dynamic Supplies had infringed Brother's trade marks, engaged in misleading and deceptive conduct and engaged in passing off. The court's decision focuses on the following issues in relation to trade mark infringement:

  • what constitutes trade mark 'use' in these circumstances;
  • what goods were considered to be covered by the registered trade marks; and
  • what constitutes consent under section 123 of the Trade Marks Act 1995 (Cth).
'Use' of trade marks

Section 20 of the Trade Marks Act grants the registered owner of a trade mark the exclusive right to use the trade mark. Dynamic Supplies argued that s20 should have operated only to prevent the sale of goods that were not Brother's but which bore its trade mark. Given that the non-branded printer drum units were products made by Brother, and not by Dynamic Supplies, Dynamic Supplies submitted that it was actually Brother who had 'used' the 'BROTHER' trade mark. 

The court rejected this argument and held that, where a manufacturer takes steps to disassociate itself from a product by removing any trade mark and selling it as a non-branded product, the manufacturer cannot be said to have 'used' a false copy of its trade mark which, without permission, is applied to its product by some disassociated entity in the distribution chain. The court held that, where a retailer imports for sale goods that are in packaging bearing a trade mark applied without the consent of the trade mark owner, that importation will be an infringing 'use' of the mark. Dynamic Supplies, by purchasing, importing and selling printer drums in counterfeit packages and with invoices that bore the 'BROTHER' mark, 'used' the 'BROTHER' trade mark in relation to the printer drums.

Goods covered by registered trade marks

The specifications for Brother's trade marks included the following words: 'printers', 'parts of and accessories and attachments for the aforesaid goods included in class 9' and 'parts of and accessories for such equipment included in class 9'. Dynamic Supplies argued that the specifications of Brother's trade marks did not cover printer drum units as the term 'consumable' was not included and printer drum units could not be considered a 'part' or 'accessory'. 

The court held that, although printer drum units were removable and replaceable, the machines in which they function cannot operate without them; thus they were a part or accessory to those machines and came within Brother's trade mark specifications.

Consent by registered trade mark owner

Section 123 of the Trade Marks Act provides a defence to infringement where a trade mark is used with the consent of the registered trade mark owner. Dynamic Supplies submitted that it had sourced the non-branded printer drum products through a US supplier, which in turn had sourced them from a wholly owned subsidiary of Brother in the USA (Brother America). Dynamic Supplies argued that, as a matter of reasonable inference, Brother America must have unwittingly sourced those products from Brother, who had erroneously sent them to Brother America rather than Company X. Dynamic Supplies maintained that these circumstances constituted consent on the part of Brother to the use of the 'BROTHER' trade marks in connection with those products.

The court held there was insufficient evidence to trace the non-branded printer drum products back to Brother America, let alone to Brother. Without evidence of the chain of supply going from Dynamic Supplies to Brother, Brother could not be said to have expressly or impliedly consented to the use of the 'BROTHER' trade marks in relation to the unbranded products. Moreover, even if Brother America was part of the supply chain of non-branded products, at no time did Brother consent to the application of its trade mark to or in relation to those products. On the contrary, Brother had distanced itself from the products by manufacturing them only as non-branded products and selling them only through a confidential arrangement with Company X. 

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