How Do I Protect My Exclusive Distribution Rights From Parallel Importers?

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Table of Contents

• What is Parallel Importing?
• Is Parallel Importing Legal?
• How Can I Protect My Exclusive Distribution Rights?
• Key Takeaways

Do you have an exclusive distribution agreement with an overseas manufacturer, where you are the only authorised Australian distributor of their product? If parallel importers began to sell those products in Australia, this could detrimentally affect your distribution rights. In this article, we look at how you can safeguard your brand from parallel importers.

What is Parallel Importing?

A parallel import is a genuinely branded product which is:

• imported into Australia from overseas; and
• sold without the permission of the brand owner.

For example, an Australian company would be a parallel importer if it imported branded sneakers from an authorised distributor overseas and sold them in competition with a local Australian seller.

Is Parallel Importing Legal?

Parallel importing is legal if the:

• imported products display a trade mark; and
• Australian trade mark owner consented to the overseas company putting the mark on the goods overseas.

If these requirements are met, no trade mark infringement has occurred. 

But often, consent is hard to prove. Consent is more likely to have been given if a related company (such as an overseas office) gives its consent to the importer. The assumption then is that the Australian mark owner consented to the trade mark’s use.

For example, if Nike US Inc consents to the Nike trade mark being put on sneakers that are then imported into Australia, it is assumed that Nike Australia Pty Ltd also consented.

However, if the Australian trademark owner and the overseas trade mark owner are completely different entities, it is unlikely that the Australian owner consented to their trade mark’s use on the product. 

How Can I Protect My Exclusive Distribution Rights?

Consider this hypothetical situation: Your supermarket store imports tinned spaghetti called “Spag Bol in a Can” from a company in China named SBIAC China. SBIAC is both the manufacturer and the owner of the trade mark in China.

You have negotiated an agreement with SBIAC to be the only distributor in Australia. But Australian Budget Supermarket then approaches a distributor in China to start importing SBIAC and stocking it in its Australian stores.

So now a direct competitor is selling your best-selling canned product. What can you do?

1. Trade Mark Registration

The best way for an Australian distributor to protect their exclusivity rights is to register the trade mark in Australia. They should obtain the consent of the overseas trade mark owner to do so.

For example, you could register the trade mark “Spag Bol in a Can”. As a result, Budget Supermarket would be infringing your trade mark rights. You have not given your consent to SBIAC China to put the Australian trade mark on the cans that are shipped to Budget Supermarket.

In some cases though, trade mark protection may not be the best solution against parallel importers. For example, SBIAC might already own the trade mark in Australia and be unwilling to transfer its trade mark rights to you.

2. Agreement with the Overseas Trade Mark Owner

Alternatively, an Australian distributor may be able to negotiate an agreement with the overseas owner. This agreement should state that you:

• become the registered trade mark owner in Australia; and
• will reassign the trade mark to the overseas owner when your distribution agreement ends.  

You may also want the manufacturer to:

• warrant that they will minimise competition from parallel imports; and
• be restricted from selling their products to third parties that it knows are likely to on-sell those products to Australia.  

Key Takeaways

Exclusive distributors should take steps to protect themselves from parallel importers before they invest in establishing a brand in Australia. Your best avenue is to register the trade mark in Australia, or enter into trade mark ownership agreements with the overseas trade mark owners.

While these strategies are not bullet-proof, they provide you with the best chance of protecting your business from competition. If you have any questions about how to protect your brand from parallel importing, get in touch with LegalVision’s trade mark lawyers on 1300 544 755 or fill out the form on this page.