No room in the playground for foreign manufactured goods

Trade marks – infringement – use as a trade mark in Australia – goods manufactured and sold overseas for resale in Australia – whether foreign vendor used marks in Australia.

Playgro Pty Ltd v Playgo Art & Craft Manufactory Ltd [2016] FCA 280, 478

The applicant (Playgro) is the registered owner of the mark PLAYGRO, and a device mark containing that word, in respect of games and playthings.  The respondents (collectively, Playgo – note the omission of the ‘r’) are Hong Kong companies that make and distribute children’s toys. The Playgo website did not, at the relevant time, target Australian consumers nor offer for sale any Playgo products. Rather, Playgo sold its goods to retailers, including Australian-based retailers.  Playgo’s Australian customers in 2013 and 2014 included Myer and Woolworths.  Playgro’s device is shown on the left below.  Playgo’s device, which is registered in China and Hong Kong, is shown on the right.


Playgro brought proceedings for trade mark infringement under the Trade Marks Act 1995 (Cth), asserting that Playgo used the PLAY GO device mark in Australia when toys bearing that mark were sold by the Australian retailers.  Alternatively, Playgro argued that the second respondent, Playgo Enterprises, had a “common design” with Myer to supply infringing goods for sale in Australia, and hence was a joint tortfeasor in respect of those infringing sales.  Myer was not a party to the proceeding.

A threshold question was whether PLAYGRO and PLAY GO (and the PLAY GO device in particular) are substantially identical or deceptively similar.  On a side-by-side comparison, Moshinsky J held that the PLAY GO device is not substantially identical with the PLAYGRO word or device marks; differences in colour and the separation and arrangement of the PLAY and GO elements in Playgo’s device were sufficient to justify that finding.  His Honour held, however, that the PLAY GO device is deceptively similar to the PLAYGRO marks.  Taking into account a customer’s imperfect recollection of the latter and the likely context of use of the marks (the evidence showed each party’s products could be found in Myer’s toy department, albeit in displays targeting different age brackets), the visual and aural similarities became significant.  His Honour held 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”.

The question of whether Playgo had used its device mark in Australia was less straightforward.  Myer’s purchases of Playgo’s products occurred under the terms of a supply agreement between Myer and Playgo Enterprises dated 19 March 2013, which was governed by Victorian law.  Orders were placed on behalf of Myer by a Hong Kong based agent, Myer Sourcing Asia Limited.  Under various contractual arrangements between the parties, Playgo’s goods were supplied on “free on board” terms, such that title and risk to those goods passed when Playgo delivered them to Myer’s nominated freight forwarding company in Shenzhen, China.  The evidence also demonstrated, however, that when Playgo Enterprises sold goods to Myer, it knew that those goods would be sold to customers in Australia.

Playgro accepted that s 4 of the Act implicitly confirms that any “use” for the purposes of s 120 must be use in Australia.  In arguing that Playgo had “used” the infringing marks in Australia, Playgro placed emphasis on the fact that the Act makes numerous references to the concept of “use”, some of which are specific to context (such as use by the owner, “controlled” use by an authorised person, or use by an unauthorised person), but many of which are not.  Further, various authorities that have considered a foreign manufacturer’s “use” of a mark in Australia for the purposes of establishing ownership of a mark as the “first user” in Australia, or “use” for the purposes of resisting a removal application based on non-use, also make reference to decisions dealing with “use” for the purposes of infringement.  The concept of “use” should be given a consistent construction.

Playgo argued that Playgro’s approach would lead to the absurd result that a foreign manufacturer with no presence in Australia, which does not advertise or offer for sale its goods in Australia, and does not import into Australia, could nevertheless be liable for trade mark infringement if goods sold overseas (and under trademarks registered in the relevant overseas jurisdiction) somehow ended up in Australia through the actions of a third party sometime in the future.  The concept of ‘use’ for the purposes of infringement could not be the same as ‘use’ for the purposes of a proprietorship/non-use action, and authorities dealing with the latter contexts should be confined to those contexts.

In finding that Playgo had used the PLAY GO device mark in Australia in the requisite sense, his Honour considered the authorities, and noted that the essential function of a trade mark was “for the purpose of indicating … a connexion in the course of trade between the goods and a person who has the right … to use the mark”.  His Honour then observed that “Once the word ‘use’ was understood in this sense, it followed that the overseas manufacturer continued to use its trade mark after property in the goods had passed to the Australian retailers, so long as the goods remained in the course of trade.”  Although the cases in question considered applications for removal for non-use, the consideration of the term “use” was “equally applicable to an infringement context”.

On the facts in the present case, the PLAY GO device had been applied at the direction of Playgo, and the goods sold to Myer in the knowledge that they would be sold in Australia.  In those circumstances, Playgo “used as a trade mark the Playgo Device Mark in Australia in that it was used as a ‘badge of origin’ to indicate a connection in the course of trade between the goods and the respondents”.  That use continued “so long as the goods were in the course of trade and it was indicative that they were the respondents’ products”; and that course of trade persisted until the ultimate sale of those goods to customers in Australia.  Accordingly, Playgo had infringed the PLAYGRO marks.

As to Playgo’s arguments to the effect that Playgro’s submissions, if accepted, would lead to every foreign company in the world being at the mercy of Australia’s trade mark legislation, his Honour made the point that in this case, the Playgo respondents “were aware that the goods were to be offered for sale and sold to customers in Australia”.  Playgo’s awareness of that fact was not sufficient, however, to support a finding of joint tortfeasance through “common design”; Playgo and Myer’s relationship was merely that of vendor and purchaser, and mere facilitation of infringement (through selling the goods to Myer) was not enough to support liability on this ground.

The authors note that it remains to be seen whether a foreign manufacturer who is unaware of the ultimate destination for its goods (or perhaps even wilfully blind to that matter) would suffer the same fate.  The decision might also prompt greater scrutiny of any intellectual property infringement indemnity provisions in international supply contracts between Australian retailers and foreign suppliers.

In the second stage of the proceeding, his Honour ordered an injunction against Playgo restraining the supply of playthings for sale in Australia that bear the PLAY GO device (whether alone or in combination with the word PLAYGO other than in reference to a company name).  His Honour has rejected Playgro’s submission that delivery up and/or a recall of goods also would be appropriate, since Playgo had taken its bat and ball from the field and stopped selling products under or by reference to the PLAY GO device to customers who import those products into Australia around November 2014 (in an effort to achieve a commercial resolution of the proceedings).  The question of the nature and quantum of any pecuniary relief remains to be determined.

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