09 May 2005

Can offering products on a foreign website infringe Australian trade marks?

By Peter Knight

Uploading a trade mark on a website outside of Australia by itself is not a "use" by the website proprietor of the mark in each jurisdiction where the mark is downloaded.

A trade mark can be owned by two or more different companies in different countries, which made sense when trade could be limited to different territories. With web commerce, territorial limitations are difficult to enforce, so how does the trade mark system operate in a world with flexible, or non-existent, borders?

The decision in Ward Group Pty Ltd v Brodie & Stone Plc [2005] FCA 471 (22 April 2005) illustrates some of the problems of controlling the use of trade marks in cyberspace. The case arose out of the unusual circumstance that the same trade mark was owned in different countries by unrelated companies.

Same product, two markets

The Ward Group produces anti-greying products called "Restoria", and owns this mark here in Australia. Brodie & Stone produces the UK version of Restoria, and owns the mark in the UK. The UK product is basically the same as the Australian Restoria.

Brodie & Stone sold supplies of the UK product to the proprietors of various websites, who then offered them for sale, usually with many other products, on their websites. These sites were not aimed specifically at Australian consumers, but at the world at large. Brodie & Stone did not know that it was selling to website owners who would then offer the products for sale online. The Ward Group's Australian solicitors made "trap purchases" of the UK product from the websites, to give themselves proof that the UK products could be obtained here.

The Ward Group had already settled with the website proprietors without a trial. It was suing Brodie & Stone on the basis that it was a "joint tortfeasor" with the website proprietors – ie. that it had helped them in breaching Ward's Australian trade mark rights - which meant the liability of the website proprietors first had to be established. The questions for the court were:

  • whether the advertising and sale of the UK Restoria products on the internet by the website proprietors constituted a passing off of the UK Restoria products as and for the Australian Restoria products of the Ward Group; and/or
  • did the advertising and sale of the UK Restoria products on the internet by the website proprietors infringe the Ward Group's Australian trade marks?

Of course, as the Court acknowledged, the commercial reality is that Australian consumers would probably never know about the UK sites. Even if they knew about them, buying the Brodie & Stone Restoria products off the UK websites is a lot more expensive than buying the Wards Restoria products locally – so why would Australian consumers bother? This is backed up by the fact that there was no evidence of any purchases of the UK products by ordinary Australian consumers; the trap purchases were the only sales in evidence.

What was the UK representation made in Australia?

The Ward Group argued that the internet vendors had passed off their businesses and products either

  • as and for the Ward Group's businesses and products, or
  • as businesses or products endorsed or approved by the Ward Group.

To establish passing off, the Ward Group had to establish that there was (1) a misrepresentation (2) made by a trader in the course of trade (3) to prospective customers or end users of the plaintiff's products or services (4) which is calculated to injure the plaintiff and (5) which causes actual damage.

The Court found against the Ward Group. It found that the website proprietors were telling the truth when they offered the UK Restoria products for sale – namely, that the product offered was the UK product offered under Brodie & Stone's established brand name in the UK.

Such conduct could, however, become a misrepresentation actionable in Australia if the UK Restoria products were advertised for sale in Australia, or if the websites were deliberately targeting Australian purchasers with the UK Restoria products, because in Australia the brand name Restoria would have been associated by such purchasers only with the Ward Group.

That however is not what happened here. There was no intention to direct the UK Restoria products to Australian consumers. It could be said that, in effect, the website proprietors were genuinely offering the UK Restoria products to the world at large, never really expecting any purchasers from Australia to discover the Brodie & Stone products included, among many others. The world wide web is open to all – it was merely an accident of its open design that the websites offering these products could be found on it.

A bigger problem for the Ward Group was that it had failed to establish actual or probable damage. The only known sales were the trap purchases, and it was most unlikely that anyone else in Australia had searched on the internet for, and then purchased, the UK Restoria products instead of the Australian Restoria products. Furthermore, as the UK and Australian Restoria products have a common origin and are not materially different in quality or standard, any sale of UK Restoria products in Australia is unlikely to harm the goodwill attaching to the Australian Restoria products.

Trade mark infringement

The issue of infringement of the Australian registered trade mark of the Ward Group at first sight appears a little different. The Ward Group had only to prove that its mark "Restoria" was "used as a trade mark (in Australia)" by the website proprietors in respect of the anti-greying hair products. That is, was the "Restoria" mark used in advertising for the UK products in Australia, or were those products sold in Australia? Only the Ward Group was entitled to use the Restoria trade mark here in Australia, because of its registration of the brand under the Australian Trade Marks Act 1995.

In this case the trade mark "Restoria" was displayed on UK websites, each of which could be accessed by Australians in Australia. Was that "use (in Australia)"?

By itself, the Court said, the display of the trade mark "Restoria" on the UK websites which were undoubtedly accessible by Australians was not enough. Ordinarily, in our law, a communication is taken to have occurred where that communication is received, but this case was unusual, in that it could not be said that the website proprietors intended to communicate to Australians purchasers in particular.

The websites did included Australia in the list of countries for the address for delivery (along with just about every other country in the world listed in a drop-down menu), and prices were converted into Australian dollars. This however was simply an incident of the operation of the websites as a whole, which offered a large number of products, to the world at large. Again, they weren't targeting Australians in a manner that would differ from the way in which those, and other, goods were being offered to consumers around the world.

The first time the website proprietors would be considered to have intended to use and used the Restoria markin Australia was when they accepted the orders placed by the trap purchasers for the UK Restoria products in terms that used the Restoria mark.

This had happened, and ordinarily a court would hold that the trade mark had been infringed. In this case, however, the only time this happened was when the Ward Group itself instigated the purchase, through its solicitors. Ordinarily, such a trap purchase would be evidence that other such sales could be and would be made, but in this case the Court was not satisfied that the trap purchases were in any way representative of other conduct of the website proprietors. Thus, in this case, the sole, proven use of the infringing mark by the foreign website proprietors in Australia was with the implicit, if not an explicit, consent of the Ward Group, and under theTrade Mark Act use of the mark with the owner's consent is not infringement.

Implications

This decision gives us extremely important guidance on a number of important issues, regardless of the curious circumstances in which it arose. The conclusions that the Court drew are equally applicable when foreign websites offer counterfeit goods:

  1. on the positive side, presenting an Australian trade mark on a foreign website can amount to use and infringement in Australia, provided that there is a sufficient connection with Australian purchasers;
  2. however, in many cases, no infringement of Australian rights will occur when goods or services are offered on a foreign website, unless there is some evidence that Australian purchasers are in some way deliberately being targeted, and are likely to make use of the foreign website, or there is some other Australian connection;
  3. the Court sounded a particular cautionary note regarding "trap purchases". While in many cases they will be probative, in each case they must be carefully assessed. In this case, they proved nothing. There must be sufficient evidence that the trap purchases are, or are likely to be, an example of general conduct of the alleged infringement, not an isolated incident artificially brought about, as in this case.

These observations will particularly strike home to those who are concerned about .au websites which turn out to be physically hosted in foreign jurisdictions, such as Vanuatu, New Zealand or Caribbean nations. Will the mere fact of an Australian country code URL be sufficient to satisfy the Court that an infringement is occurring in Australia?

Likewise, the decision presents issues for the victims of the increasing problem of counterfeit goods being offered on auction sites, such as eBay. EBay, of course, does everything it can to prevent this occurring, and so cannot be blamed. Where the goods are offered on a foreign eBay website, however, the offeror may be immune from the operation of Australian law. Action needs to be taken in the country of the offering website, or the offeror.

The Court drew attention to the recent, much publicised decision of the Australian High Court in Dow Jones & Company v Gutnick (2002) 210 CLR 575, in which it was found that an action for defamation could be conducted in an Australian court where the defaming conduct occurred on a foreign website. However, as the Court observed, this decision was based upon the fact that proven damage had occurred in Australia to the victim of the defamation, and this was sufficient. The Ward Group was unable to establish any such damage in this case.

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