Dealing with overseas companies? Do you know who you are really doing business with?
In the 2010 case of Sporte Leisure Pty Ltd and Ors v Paul’s International Pty Ltd and Ors (No 3) [2010] FCA 1162, an Australian trader was caught out after arranging with an overseas distributor, to import clothing, footwear and headwear bearing trade marks which the overseas distributor was not authorised to use. This case highlights the importance of conducting your due diligence when dealing with overseas companies to ensure that the ‘chain of supply’ is authorised and does not come back to bite you.
In this case, three applicants (all applicants being related entities and associated with Australian golfing legend, Greg Norman) brought an action against five respondents (all the respondents being entities owned and operated by the fifth respondent, Mr Paul Dwyer) for:
a) trade mark infringement contrary to section 120 of the Trade Marks Act 1995; and
b) false and misleading representations pursuant to section 52 and 53(e) of the Trade Practices Act 1974.
The respondents subsequently filed a cross-claim against the applicants for false and misleading representations on its website about its global network of licensed distributors.
Background
Trade mark infringement
The second applicant, Great White Shark Enterprises LLC (GWS) is the registered owner of Australian trade marks ‘GREG NORMAN’, and a stylised logo bearing a shark (Trade Marks). The Trade Marks are protected for clothing, footwear and headwear in class 25.
GWS licensed the use of the Trade Marks to its related entity, Greg Norman Collection Inc (GNC). GNC was then authorised to enter into sub-licence agreements with third parties around the world to deal with the Trade Marks.
The case has its origins in India, whereby GNC licensed the Trade Marks to BTB Marketing PVT Ltd (BTB), an Indian company. Under that sub-licence, BTB was permitted to distribute clothing, footwear and headgear bearing the Trade Marks within a restricted territory referred to as the‘Union of India’.
Consequently BTB supplied products bearing the Trade Marks to another company, Sunsports (BVI) Limited (Sunsports), based in Pakistan. Sunsports then commenced supplying a Singaporean company PT International Corporation (PT International) which then supplied the same products bearing the Trade Marks to the respondents.
Essentially the second respondent, Paul’s Retail Pty Ltd (Paul’s Retail), took delivery of products in Australia bearing the Trade Marks. The applicants alleged that the respondents had infringed the Trade Marks by importing, distributing and selling infringing products bearing the Trade Marks within Australia. The critical issue for the court to consider was whether the Trade Marks were applied to the products supplied outside of the Union of India by BTB (the Indian licensee) with the consent of GNC (the primary licensee). Consent would essentially exonerate the respondents in Australia of any wrong doing.
False and misleading representations
In addition, the applicants alleged that the respondents had made false and misleading representations about the products bearing the Trade Marks in a product catalogue which was made available to Australian consumers. The applicant’s alleged that the price stated by the respondents (effectively promoting a significant cost saving to consumers), substantially overstated the actual recommended retail price. The overstatement was between 11 and 33 percent for five of the six products advertised and was alleged to cause consumer confusion.
The Cross-Claim
In the cross-claim the respondents alleged that the applicants had made false and misleading representations regarding the products by its website www.shark.com. The respondents alleged that the website suggested that BTB was authorised to use the Trade Marks on products manufactured or sold by BTB in other countries around the world, not just the Union of India. The respondent relied on this information when it decided to import and sell products bearing the Trade Marks in Australia.
The decision
Trade mark infringement
The Court found:
consent was not obtained from GNC by BTB to supply products bearing the Trade Marks outside of the Union of India;
the second respondent was engaging in trade mark infringement in Australia on the basis it imported, offered for sale and sold products bearing the Trade Marks in Australia; and
the remaining respondents were not found to have infringed the Trade Marks in Australia because all relevant acts were performed by the second respondent only.
Director’s liability
Turning on the issue of director’s liability, the Court found that the sole director was not liable as a joint tortfeasor because the director:
Cross-Claim
The Court dismissed the respondent’s cross-claim because the applicant was not found to have engaged in misleading or deceptive conduct when promoting its licensed global distributors on the shark.com website.
Lavan Legal comment
This case highlights the importance of getting the terms of a trade mark licence right. It also highlights the fundamental importance of monitoring the actions of licensees and sub-licensees.
When entering into a trade mark licence agreement ensure the scope of the licensee’s rights and obligations under the licence are expressly clear. Incorporating schedules setting out the countries where a licensee can deal with your intellectual property is just one of the many examples of adding clarity to these types of agreements.
This decision also emphasises the importance of conducting due diligence when entering into agreements with others who may be professing to hold a right when they do not.
For more information please contact partner Wayne Zappia on (08) 9288 6931 / wayne.zappia@lavanlegal.com.au or articled clerk Matthew Parker on (08) 9288 6847 / matthew.parker@lavanlegal.com.au.
