Reimagining Trademark Exhaustion: Does Australia’s New Defense Offer a Way Forward?

Barton Beebe & Haochen Sun (eds), Charting Limitations on Trademark Rights (Oxford University Press 2021)

UNSW Law Research Paper No. 19-93

23 Pages Posted: 13 Dec 2019 Last revised: 28 Jan 2021

See all articles by Michael Handler

Michael Handler

University of New South Wales (UNSW) - Faculty of Law

Date Written: August 1, 2019

Abstract

Despite the strong economic case in favour of liberal trade mark exhaustion rules, both the parallel importation of legitimate goods, and the sale of second-hand goods, have come to be treated with a high degree of scepticism in legislatures and courts around the world. Given how restrictive most jurisdictions’ laws on trade mark exhaustion have become, it is important to consider whether there are other ways WTO Members could approach exhaustion and, if so, what a model for reform might look like. In this regard, it is highly instructive to look at recent developments in Australia. With the introduction of a new defence to infringement contained in section 122A of the Trade Marks Act of 1995, which came into effect on August 25, 2018, Australia now has the most liberal trade mark exhaustion regime of any major jurisdiction. In summary, the new defence applies if the parallel importer or reseller reasonably believed that the mark was originally applied to the goods by or with the consent of the owner, or a range of other parties, with “consent” being defined in exceptionally broad terms. In a reversal of the typical onus of proof, if an importer/reseller forms such a reasonable belief it will not be liable for infringement unless it persists in its conduct after information as to the lack of consent to application of the mark is brought to its attention. And, crucially, the defence does not in any way turn on whether the imported/resold goods have been altered, repackaged or relabelled, or if there are material quality differences between the imported/resold goods and those supplied locally by or under the licence of the mark owner.

This paper provides context for the new Australian exhaustion laws, showing that Australia, over the course of the twentieth century, had recognised the benefits of facilitating the parallel importation of legitimate goods, but that since the mid-1990s an overly restrictive approach had come to be taken by the legislature and courts. It then examines the liberal new section 122A defence in detail, analysing its scope by reference to the more restrictive pre-2018 case law, and showing how it operates more favourably to importers and retailers than any other set of exhaustion rules in the world. It then uses the recent Australian reforms as a springboard for a broader reconsideration of whether trade mark exhaustion rules in other jurisdictions should be liberalised, showing that the Australian approach is underpinned by different ways of thinking about exhaustion—namely, as to the proper scope of registered owners’ rights, as to what sort of conduct by importers and owners we want to incentivise, and as to how risk should be allocated between such parties.

Keywords: trade mark, exhaustion, trade mark exhaustion rules, WTO, Trade Marks Act, Australia

Suggested Citation

Handler, Michael, Reimagining Trademark Exhaustion: Does Australia’s New Defense Offer a Way Forward? (August 1, 2019). Barton Beebe & Haochen Sun (eds), Charting Limitations on Trademark Rights (Oxford University Press 2021), UNSW Law Research Paper No. 19-93, Available at SSRN: https://ssrn.com/abstract=3503150 or http://dx.doi.org/10.2139/ssrn.3503150

Michael Handler (Contact Author)

University of New South Wales (UNSW) - Faculty of Law ( email )

Kensington, New South Wales 2052
Australia
+61 2 9385 2874 (Phone)

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