FEDERAL COURT OF AUSTRALIA

Brother Industries, Ltd v Dynamic Supplies Pty Ltd [2007] FCA 1490

TRADE MARKS – infringement of registered trade marks – importing and selling goods packaged in counterfeit packaging constitutes ‘use’ of trade marks – construction of trade mark specifications – meaning of “consumables” – defence of consent – insufficient evidence to establish chain of supply started with manufacturer – consent of registered owner, not related entity in corporate group, must be acquired.

TRADE PRACTICES – misleading and deceptive conduct and false representations – importing and selling goods packaged in counterfeit packaging is misleading and deceptive – intention not relevant – importing and selling goods packaged in counterfeit packaging constitutes passing off.

TRADE PRACTICES – liability for sale of good not of merchantable quality – evidence of defectiveness required.

WORDS AND PHRASES – “consumable”

Trade Marks Act 1995 (Cth), ss 7(4), 9, 17, 20, 120, 123

Trade Marks Regulations 1995 (Cth), sch 1

Trade Practices Act 1974 (Cth), ss 52, 53, 74D, 74H

Angoves Pty Ltd v Johnson (1982) 43 ALR 349 cited

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 cited

Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45 considered

Champagne Heidsieck et Cie Monopole Societe Anonyme v Buxton [1930] 1 Ch 330 cited

Coca-Cola Co v All-Fect Distributors Ltd (1999) 96 FCR 107 considered

Estex Clothing Manufacturers Pty Ltd v Ellis and Goldstein Ltd (1967) 116 CLR 254 considered

Given v CV Holland (Holdings) Pty Ltd (1977) 29 FLR 212 cited

Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 cited

Leeks v FXC Corporation (2002) 118 FCR 299 cited

Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2000) 104 FCR 61 considered

Nokia Corporation v Truong (2006) 66 IPR 511 cited

Pioneer v The Registrar of Trade Marks (1977) 137 CLR 670 considered

Playboy Enterprises International Inc v Hong (2004) 63 IPR 533 considered

R & A Bailey & Co Lt v Boccaccio Pty Ltd (1986) 4 NSWLR 701 considered

Revlon Inc v Cripps and Lee [1980] FSR 85 cited

Thunderbird Products Corp v Thunderbird Marine Product Pty Ltd (1974) 131 CLR 592 cited

Transport Tyres Pty Ltd v Montana Tyres Rims and Tubes Pty Ltd (1999) 93 FCR 421 considered

W.D. & H.O. Wills (Australia) Lrd v Rothmans Ltd (1956) 94 CLR 131 cited

Blanco White TA and Jacobs R, Kerly’s Law of Trade Marks and Trade Names (12^th ed, Sweet & Maxwell, 1986)

Davison M, Johnston K and Kennedy P, Shanahan’s Australian Law of Trade Marks & Passing Off (3^rd ed, Lawbook Co., 2003)

BROTHER INDUSTRIES, LTD AND BROTHER INTERNATIONAL (AUST) PTY LTD (ACN 001 393 835) v DYNAMIC SUPPLIES PTY LTD (ACN 064 793 862)

NSD 50 OF 2005

TAMBERLIN J

26 SEPTEMBER 2007

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 50 OF 2005

BETWEEN:

BROTHER INDUSTRIES, LTD

First Applicant/First Cross-Respondent

BROTHER INTERNATIONAL (AUST) PTY LTD

(ACN 001 393 835)

Second Applicant/Second Cross-Respondent

AND:

DYNAMIC SUPPLIES PTY LTD (ACN 064 793 862)

Respondent/Cross-Claimant

JUDGE:	TAMBERLIN J
DATE OF ORDER:	26 SEPTEMBER 2007
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The applicants draft, file and provide to the respondent Draft Short Minutes of Orders in respect of the precise form of the orders arising out of these reasons for judgment, costs and directions as to the future conduct of these proceedings.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 50 OF 2005

BETWEEN:

BROTHER INDUSTRIES, LTD

First Applicant/First Cross-Respondent

BROTHER INTERNATIONAL (AUST) PTY LTD

(ACN 001 393 835)

Second Applicant/Second Cross-Respondent

AND:

DYNAMIC SUPPLIES PTY LTD (ACN 064 793 862)

Respondent/Cross-Claimant

JUDGE:	TAMBERLIN J
DATE:	26 SEPTEMBER 2007
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 This is an application for injunctive and other relief by Brother Industries, Ltd, a Japanese company (“Brother Japan”), and its wholly owned Australian subsidiary, Brother International (Aust) Pty Ltd (“Brother Australia”). When referring to both of these companies, I will use the term “Brother”.

2 Brother claims that Dynamic Supplies Pty Ltd (“Dynamic Supplies”) has infringed registered Australian trade marks of Brother Japan for the word ‘BROTHER’, and has engaged in misleading and deceptive conduct in contravention of ss 52 and 53 of the Trade Practices Act 1974 (Cth) (“TPA”) and the tort of passing off.

3 The alleged infringing conduct of Dynamic Supplies is the sale in Australia of unbranded, generic printer drum units in packaging which is allegedly counterfeit and to which the ‘BROTHER’ trade marks were applied.

4 In response to these allegations, Dynamic Supplies has filed a cross-claim seeking declaratory relief and damages by way of indemnity pursuant to s 74H of the TPA in respect of compensation which it paid to its customers who purchased defective goods manufactured by Brother.

BACKGROUND

5 For many years, Brother Japan has conducted an international business of producing, marketing and selling a variety of products, ranging from sewing machines to printers. Since the late 1970s, Brother Australia carried on the Australian arm of that business with the licence and authority of Brother Japan, and used several registered trade marks relating to the word ‘BROTHER’.

6 One product produced by Brother Japan is a printer drum unit. These units are designed to incorporate toner cartridges within their structure and are then inserted into machines such as printers and facsimiles in which they enable the transfer of the ink in the toner cartridge onto paper fed through the machines. Each printer drum unit produced by Brother is designed to be used with a number of machines. The specific printer drum unit relevant in this case, and in respect of which Brother’s trade marks are registered, is called a ‘Brother DR-200’ unit. This unit is embossed with the ‘BROTHER’ brand. It receives a ‘Brother TN-200’ toner cartridge and is manufactured for use in conjunction with a wide range of Brother machines, including laser printers, facsimiles and multi-function devices.

7 The Brother DR-200 is packaged in distinctive packaging, comprising a box made of cardboard which bears the ‘BROTHER’ trade mark. An unrelated Japanese company, Asano Danboru Kabushiki Kaisha (“Asano Danboru”), manufactures the Brother DR-200 packaging for all Brother DR-200 units produced in Japan. It does so according to very precise specifications. The evidence is that Asano Danboru has always performed this job exclusively for Brother Japan and has never outsourced manufacture of the Brother DR-200 packaging. This exclusivity of packaging supply has continued unbroken since the commencement of the relationship between Brother and Asano Danboru.

8 Brother also makes a printer drum unit which is similar but not identical to a Brother DR-200 and is not embossed with the ‘BROTHER’ name. It is called an ‘original equipment manufacturer’ product (“OEM product”). These OEM products are not branded, and have never been branded, with the ‘BROTHER’ trade mark. All OEM products produced by Brother are sold exclusively to one purchasing company (“Company X”), the identity of which, in these proceedings, is the subject of a confidentiality order. Having purchased the OEM products, Company X then sells or distributes them under a brand name unrelated to Brother or with no brand name at all.

9 The respondent, Dynamic Supplies, is an Australian company which imports and distributes or sells printer drum units which are made by Brother and contained in packaging bearing the ‘BROTHER’ trade mark. Until 2003, Dynamic Supplies sourced almost all of the Brother products it sold or distributed from Brother Australia or its authorised distributors. However, this arrangement changed in early 2003 when Dynamic Supplies sourced three shipments of units at a substantially lower price from another supplier in the United States of America, namely Discover Group Inc (“Discover Group”), which is an entity unrelated to the applicants.

10 In early 2004, Brother made several trap purchases from Dynamic Supplies and thereby came into possession of non-branded OEM products (“Sample Units”) which were packaged in what appeared to be Brother DR-200 packaging (“Sample Packaging”) and which were claimed to have been sold by Dynamic Supplies to a purchaser acting on behalf of Brother. Brother formed the view and claims in these proceedings that the packaging of the OEM products bearing the BROTHER mark is counterfeit. In addition, Brother received warranty claims from Dynamic Supplies concerning several OEM printer drum units (“Warranty Units”). After a technical assessment of these units, Brother honoured some of the claims and rejected others. The latter claims were rejected, Brother says, because it considered the products not to be genuine Brother DR-200 units. In this context, Brother commenced these proceedings, alleging that Dynamic Supplies is infringing its ‘BROTHER’ trade marks; engaging in misleading and deceptive conduct in breach of s 52 of the TPA; and falsely representing and passing off OEM products as branded Brother products. Dynamic Supplies denies these allegations.

THE TRADE MARKS

11 There are four registered trade marks which are the subject of these proceedings (“Brother’s Australian trade marks”). Each of them is a trade mark in respect of the word ‘BROTHER’. The registration details are tabulated below, with emphasis added.

Number	Registration date	Type	Class	Goods or Services
440897	18 February 1986	word, series	9	Computers, including personal computers; printers, including printers for use with computers or word processors; graphic writers; word processors; paper feed devices including those for use with printers and word processors; disc drives; facsimile transmission apparatus; parts of and accessories and attachments for the aforesaid goods included in class 9; all other goods in class 9
479964	20 January 1988	word, series	16	Typewriters, including electronic typewriters; all other goods in class 16
479966	20 January 1988	word, series	9	Computer hardware and software for controlling machinery such as machining apparatus; word-processing hardware and software; parts of and accessories for such equipment included in class 9; microprocessor-based control systems for use with machine tools; all other goods in class 9
1000137	30 April 2004	Word, stylised	9	Drum units, parts and accessories in this class for the aforesaid goods

12 While the three registered trade marks 440897, 479964 and 479966 each include rights to the word ‘BROTHER’ in plain type, all four registered trade marks are registered for fonts which include the following stylised version of the trade mark:

13 The relevant classes of trade marks are classes 9 and 16, which are set out in schedule 1 to the Trade Marks Regulations 1995 (Cth) (“the Regulations”). Class 9 refers to goods including electric, photographic and optical apparatus and instruments, and in particular apparatus for the recording, transmission or reproduction of sound or images, data processing equipment and computers. Class 16 refers to goods including cardboard and goods made from it (but which are not included in other classes), printed matter and office requisites other than furniture.

ISSUES FOR DETERMINATION

14 In relation to Brother’s infringement claim, there are four issues:

(i) Does the use by Dynamic Supplies of the ‘BROTHER’ trade mark on its invoices and on the packaging in which it imported, distributed, offered for sale and sold the Sample Units constitute use of the name Brother as a trade mark?

(ii) Is the use by Dynamic Supplies conducted in the course of trade?

(iii) Is the use by Dynamic Supplies conducted in relation to goods which are covered by Brother’s Australian Trade Marks?

(iv) Did Dynamic Supplies use the ‘BROTHER’ trade mark with the licence or authority of Brother?

15 There is no dispute that Dynamic Supplies imported, stored, distributed, offered for sale and sold OEM products as Brother DR-200 units under or by reference to the ‘BROTHER’ mark. This concession by Dynamic Supplies is stated not to constitute a concession on their part in respect of the issues concerning whether it used the mark as a trade mark and it applies only to the Sample Units which were the subject of evidence. In addition, there is no dispute that the Sample Packaging and the relevant invoices bear a mark which is substantially identical or deceptively similar to Brother’s Australian Trade Marks.

16 In respect of Brother’s claims under the TPA and the tort of passing off, there are two live issues:

(v) Does Dynamic Supplies’ conduct involve a misrepresentation in contravention of ss 52 and 53 of the TPA that the Sample Units are Brother DR-200 units branded with the ‘BROTHER’ name?

(vi) Does Dynamic Supplies’ conduct constitute the tort of passing off?

17 Although there was some confusion as to whether Dynamic Supplies acknowledges that Brother has a sufficient reputation in Australia in the name and trade mark of ‘BROTHER’ to ground the claim under the TPA, it appears that this point is not genuinely disputed. I briefly discuss the issue of reputation below at [81]-[82].

18 Concerning Dynamic Supplies’ cross-claim, there is only one issue to be determined:

(vii) Is Dynamic Supplies entitled to relief pursuant to ss 74D and 74H of the TPA?

EVIDENCE FOR BROTHER

19 I turn now to the evidence relating to the above issues. A large body of affidavit evidence was adduced in these proceedings, some of which is claimed by Brother to be confidential and will be so treated. Several of the deponents were required for cross-examination, and their evidence is summarised below.

20 Mr Suzuki is the manager of a development group in a division of Brother Japan. He commenced employment with Brother Japan in 1985 and has been responsible, inter alia, for designing and reviewing designs of components of various Brother products. In particular, Mr Suzuki has experience with the design of printer drum units and toner cartridges, including the Brother DR-200. He gave evidence that Brother Japan manufactures, distributes and sells the Brother DR-200, and that these units and their packaging bear the ‘BROTHER’ trade mark. Based on this familiarity, Mr Suzuki says that the Sample Units acquired by Brother from Dynamic Supplies in early 2004 were not Brother DR-200 units, a conclusion reached after considering the absence of the ‘BROTHER’ trade mark, the cleaning brush mechanism, the plastic paper guide and guide cover, the anti-static sheet and the transfer roller on each product.

21 Mr Sonoda is the manger of a development department in a division of Brother Japan. He commenced employment with Brother Japan in 1986. Until late 1994, Mr Sonoda’s roles and responsibilities were similar to those of Mr Suzuki, involving the design and review of designs of Brother products. However, at that date, Mr Sonoda was appointed to a position relating to the design and supply of an OEM product to Company X. Although he has been promoted since, Mr Sonoda’s experience in the design and development of Brother products remains relevant to his current position. Mr Sonoda gave evidence of the path taken by Brother Japan to convert a Brother DR-200 into an OEM product suitable for use by Company X. He gave evidence that the trade mark ‘BROTHER’ is not and never has been applied to any OEM products. Based on this experience and knowledge, Mr Sonoda identified the Sample Units as OEM products produced by Brother Japan for sale to Company X.

22 Three affidavits were filed by Mr Inagawa in these proceedings. He is an assistant manager of a production department in a division of Brother Japan, having joined the company in 1968. Since 1999, his role has been to supervise the production of printer drum units, including the production lines for Brother DR-200 units and the OEM products sold to Company X. Mr Inagawa gave evidence detailing the production process for Brother products. He states that a production order is created specifying the quantity of products required and the date of manufacture. Having received a copy of this production order, the relevant departments of Brother Japan and Asano Danboru fill the order with the appropriate number of printer drum units and packaging respectively. Serial codes are then attached to the printer drum units by stickers. During this process, there are five separate ways in which Brother Japan checks the number of printer drum units and packaging units match the production order. On the basis of his knowledge and experience of this process, Mr Inagawa states that it is not possible for the number of printer drum units produced to exceed the number or packaging units produced, or vice versa. The detail of the process is recorded in and confirmed by log books, which are kept for each separate production line. Mr Inagawa also deposes to the procedures that Brother Japan has in place for when a printer drum unit or packaging unit is defective or damaged. On the basis of his familiarity with Brother Japan’s production procedures and serial codes, Mr Inagawa highlighted a discrepancy in the serial codes applied to the Sample Units and the Sample Packaging which indicate that the Sample Units were purportedly packaged in the Sample Packaging significantly in advance of their date of production. He also concluded that the Warranty Units sent by Dynamic Supplies to Brother were not ‘BROTHER’ branded units but rather were OEM products produced for Company X.

23 Ms Sakaida is an employee of a Japanese subsidiary of Brother Japan, known as Brother International Corporation (“Brother International”), and has been since 1991. Until February 2007, Ms Sakaida was involved in the ordering, delivery and credit control aspects of the supply of OEM products by Brother Japan to Company X. In connection with the evidence given by Mr Inagawa, Ms Sakaida deposes that Brother has not received any communication from Company X indicating that the Warranty Units, which were sent by Brother to Company X, did not arrive or did not correspond to the relevant purchase order.

24 Mr Murase gave evidence relating to the Brother DR-200 packaging. He is the factory general manager of production at the Tomei factory of Asano Danboru, a company he had been with since 1982. Brother called him as an expert witness in relation to cardboard packaging, and, although Dynamic Supplies addressed the pre-existing relationship between Mr Murase and Brother in cross-examination, I find that this did not diminish in any way the expertise, credibility or independence of his evidence, which I accept.

25 Mr Murase gave evidence that Asano Danboru has never outsourced the manufacture of Brother DR-200 packaging to a third party and that it delivers to Brother Japan on a “just in time” basis in order to reduce storage costs. He stated that Brother DR-200 packaging was manufactured according to very precise specifications, which could subsequently be used to distinguish it from other packaging. The specifications are recorded on a Corrugated Cardboard Production Card, which can be amended as necessary. An example of one such amendment was in April 2002, where the specifications of the packaging changed from brown cardboard to white cardboard. Mr Murase exhibited the Corrugated Cardboard Production Card for the Brother DR-200 packaging, and in cross-examination clarified the important daily use which Asano Danboru makes of the card.

26 Mr Murase also exhibited a brown cardboard version of Brother DR-200 packaging, which was produced on a special production run for the purpose of these proceedings and according to the specifications recorded on the Corrugated Cardboard Production Card as it stood before 2005, after which date the specifications were dramatically altered. An effort was made in cross-examination to demonstrate why this exhibit would not be appropriate for use in these proceedings. However, I find that the cross-examination did not affect the validity of the exhibit, at least for the forensic purposes of comparing it with the Sample Packaging.

27 Upon inspection of the Sample Units and Sample Packaging, Mr Murase, based on his experience and knowledge, concluded that Asano Danboru did not manufacture the Sample Packaging. He reached this conclusion after enumerating differences he perceived between the Sample Packaging and Brother DR-200 packaging relating to matters such as the number of “flutes” or corrugations, the colour of the cardboard, the quality of the printing and the type of cuts (“smooth” or “puckered”). Mr Murase also notes that the printing plates which were used in connection with the Brother DR-200 packaging could not have been used in respect of the Sample Packaging because they were of different dimensions

28 Mr Sato is a team leader of the cost planning group in a division of Brother Japan. He joined the company in 1984 and from 1989 to the present day has been responsible for managing the purchasing arrangements between Brother Japan and its packaging suppliers, such as Asano Danboru. He states that Asano Danboru is and has always been the exclusive supplier of Brother DR-200 packaging in Japan, which supply it ensures on a “just in time” basis. The only other suppliers of Brother packaging were based in China, and this packaging was exclusively for Brother DR-200 units manufactured in China. His evidence was that Brother DR-200 packaging manufactured in China is and never has been brought into Japan. Mr Sato gave this evidence on the basis of both his experience and information gleaned from a search of a Brother Japan database, which he exhibited.

29 Mr Nakamiya is a team leader of a department in a division of Brother Japan. He was appointed to this position in 2001, having started with the company in 1991. His primary responsibility is to liaise with Brother Japan’s customers around the world (which are often subsidiary companies such as Brother Australia) and to sell a certain number of products. These products include the Brother DR-200 printer drum unit. Mr Nakamiya gave evidence that Brother DR-200 units have only ever used two bar codes, based on destination of sale (4977766562560 for Europe and 012502562771 for the United States). He further states that no such bar code is attached to OEM products or their packaging when they are sent to Company X. Having inspected the Sample Packaging, he states that they bear a bar code (4977766562584) which Brother Japan has never used in connection with Brother DR-200 units. Mr Nakamiya’s evidence is supported by information obtained from searches of a Brother Japan database, which he exhibited.

30 Ms Weldon is the administration manager of Spencers Office National (“Spencers”). Ms Collins is the administration manager of ATF Office Solutions (“ATF”). Both Spencers and ATF are Australian companies with commercial relationships with both Brother and Dynamic Supplies. Ms Weldon gave evidence that on 26 February 2004 she purchased a Brother DR-200 unit from Dynamic Supplies after being asked to do so by Mr Ward of Brother Australia. Ms Collins gave evidence that she too was asked by Mr Ward to purchase a Brother DR-200 unit from Dynamic Supplies on 4 March 2004, and did so. Having completed their respective purchases, both units were promptly forwarded to Mr Ward. Although Ms Weldon was required for cross-examination, little additional or contradictory evidence was gleaned from cross-examination.

31 Mr Ward is the State Manager in Queensland and the Northern Territory for Brother Australia. He gave evidence that he directed both Ms Weldon and Ms Collins to make the purchases referred to above. Upon receipt of the Brother DR-200 units, he forwarded the unopened boxes to Mr Nawa, who was then a director of Brother Australia. Mr Nawa gave evidence that he received the boxes, forwarded them to Mr Yanagihara, then an employee of Brother Australia, and instructed him to send the boxes to Mr Ishihara, an employee of Brother Japan. Mr Yanagihara gave evidence that he followed Mr Nawa’s instructions. Mr Ishihara deposes that he received the two unopened boxes. He states that he took them to the office of Mr Kobayashi, a manager of Brother Japan’s intellectual property department, and together they examined the boxes and their contents while Mr Kobayashi took a series of photographs of them. Mr Kobayashi gave evidence corroborating Mr Ishihara’s evidence, and exhibited his photographs. From among these people, only Mr Ward was called for cross-examination. Although Mr Ward was questioned in detail on his interaction with both Ms Weldon and Ms Collins when purchasing the two Brother DR-200 units from Dynamic Supplies, his evidence was not disturbed by that cross-examination

32 Mr Dobrowolski is a Service Technician employed by Brother Australia. He gave evidence that over the course of January to June 2004 Brother Australia received a total of ten printer drum units from Dynamic Supplies with claims that they were defective and requests that Brother Australia should honour warranty claims on them. Brother Australia honoured four of the warranty claims and provided replacement Brother DR-200 units. A further fifth warranty claim was rejected, but a replacement Brother DR-200 unit was provided to Dynamic Supplies as a gesture of goodwill. The final five requests were rejected and the products were returned to Dynamic Supplies without replacement Brother DR-200 units being sent. Mr Dobrowolski’s evidence was not shaken in cross-examination, however he did provide detailed evidence of the procedures by which Brother Australia deals with warranty claims and determines whether a product returned to it is genuine.

33 Mr Miura is the Director and General Manager of the marketing division Brother International. He has been with Brother since 1977 and for the past 12 years has been the key contact for Company X within Brother. He gave evidence that Brother Japan supplies a range of 20 to 30 OEM products to Company X, sometimes branded with Company X’s brand name and sometimes with no brand name at all. He notes that at no stage has any OEM product produced by Brother for Company X borne the ‘BROTHER’ trade mark or any other indication that they were Brother products. Moreover, he says, on the basis of his experience as Company X’s key contact, that Brother has never granted any licence or authorisation to Company X to use the ‘BROTHER’ trade mark or name. Mr Miura elaborated on this evidence in cross-examination, stating that the OEM products produced exclusively for Company X, including a range of approximately five printer drum units, were and would not be advertised as being compatible with Brother printers, facsimiles and other devices. This is because the OEM products would be used in Company X’s own machines, which, however, themselves may have been purchased as OEM products from Brother. Although Mr Miura was unable to recollect some important pieces of information, I accept his evidence notwithstanding the submissions of the respondent to the contrary.

34 Mr Sacco is the Vice-President and Chief Legal Officer of a wholly owned subsidiary of Brother Japan incorporated in the United States of America and called Brother International Corporation (“Brother America”). Brother America imports, warehouses, markets, sells and distributes Brother-branded products in the United States of America. It operates out of two warehouses in Memphis and California. Mr Clement, who also gave evidence for Brother, is the Operations Manager of Brother America, and is responsible for supervising the receipt of shipments of stock at the Memphis warehouse. Mr Sacco gave evidence that Brother America’s subsidiary, Brother Industries (USA) Ltd, performs some functions at the Memphis warehouse, but that these functions do not include the importation, warehousing, marketing, sale or distribution of printer drum units. These functions are solely within the domain of Brother America. Moreover, Mr Clement deposes that the Memphis warehouse has only ever received Brother DR-200 units from Brother Japan and Brother International.

35 Mr DeVonish is Brother America’s Senior Corporate Director of Logistics and Procurement, and has been with the company for almost 20 years. In his present position, Mr DeVonish is responsible for the procurement of printer drum units and packaging for Brother America. This role includes ensuring that Brother America’s inventories are at correct levels. He gave evidence that Brother America only sources Brother DR-200 units from Brother Japan and Brother International, evidence which is supported by a search of Brother America’s product and inventory control database. Mr DeVonish also states that Brother America does not import into the United States of America any OEM products which are equivalent to Brother DR-200 units or any Brother DR-200 packaging other than that accompanying the Brother DR-200 units. His evidence, like Mr Nakamiya’s, is that Brother DR-200 units imported by Brother America are identified by a single particular bar code specific to the United States of America. Mr DeVonish also gave evidence that Brother America sent 17 shipments of Brother DR-200 units to a company incorporated in the United States of America called All Day Trading Co. Inc (“All Day Trading”), invoices for which were issued between the dates of 8 February 2003 and 6 December 2003. Although he was subjected to some questioning as to the practices he outlined in his affidavits, I find that none of Mr DeVonish’s evidence was shaken on cross-examination.

36 Evidence was also given by several other witnesses for Brother, concerning collectively the reputation of Brother in Australia in respect of the name and trade mark ‘BROTHER’. Although two of these witnesses, Mr Frair and Mr Cullen, were cross-examined, the substance of their evidence was not materially diminished. The cross-examination did not focus on whether Brother possessed the reputation it claims to have. Accordingly, I will not dwell on this evidence now, but will return to the issue of reputation briefly at [81]-[82].

EVIDENCE FOR DYNAMIC

37 Dynamic Supplies adduced evidence in these proceedings in the form of several affidavits. Mr Piccinini, the Managing Director of Dynamic Supplies, deposed three affidavits, two of which were read in Court. His evidence was the subject of cross-examination. Mr Piccinini gave evidence that employees of Dynamic Supplies are given strict instructions to report any suspicions of non-genuine products directly to him. He states that printer drum units, such as the Brother DR-200, are ‘consumable’ products, and that almost all Brother products purchased by Dynamic Supplies are purchased from authorised Brother distributors in Australia. One time, however, when this practice changed somewhat was in 2003, when Dynamic Supplies sourced three shipments of Brother DR-200 units from Discover Group at a price lower than that offered by Brother’s Australian distributors. Having received the shipments, Mr Piccinini noticed that the Brother DR-200 units were packaged in brown cardboard, which differed from the white cardboard in which the units sourced from authorised Brother distributors were packaged. He assumed that this difference was because Discover Group was sending him “old stock” from the period before April 2002 when Brother DR-200 units were packaged in brown cardboard instead of white. Mr Piccinini also confirms that Dynamic Supplies had received orders from Spencers and ATF in early 2004 for the purchase of several Brother DR-200 units, and that all of these purchases were filled from the stock which Dynamic Supplies had purchased from Discover Group. Moreover, Mr Piccinini deposes that when the Warranty Units were returned to Dynamic Supplies by its customers, Dynamic Supplies placed nine warranty claims with Brother Australia. Five of the Warranty Units were replaced by Brother, but four were returned because they were deemed not to be Brother products. In oral evidence, Mr Piccinini also gave evidence about the practice which Dynamic Supplies pursues when a retailer returns a product which was purchased from it.

38 Mr Piccinini’s evidence was shown to be unreliable in cross-examination. Upon questioning, Mr Piccinini withdrew portions of his first affidavit; gave evidence in cross-examination which contradicted his evidence in chief; acknowledged that one of his affidavits reflected excess emotion; and sought to resile from the contents of that affidavit which was shown to contain speculative allegations about a conspiracy, which he admitted was without foundation. In addition, Mr Piccinini was evasive in answering questions and at times gave an answer and subsequently retreated from it. When pressed to formulate a credible commercial scenario which might suggest a reason for Brother to act in the reprehensible way he alleged, Mr Piccinini was unable to respond or support his allegations and suspicions. Although he found it difficult to answer some questions which derived from confidential evidence led by Brother, Mr Piccinini’s evidence on the whole was unsatisfactory in the extreme.

39 Mr Blackman is the Director of Discover Group, a company he established in 1998. Discover Group is a wholesaler of computer ‘consumables’, such as Brother DR-200 units, and has had a commercial relationship with Dynamic Supplies since 1998. Mr Blackman gave evidence that Discover Group sources its Brother products from All Day Trading, which he says is an authorised distributor of Brother products in the United States of America. He provided some information detailing Discover Group’s purchases of Brother DR-200 units from All Day Trading, and of three shipments to Dynamic Supples. Mr Blackman also states that, to his recollection, Brother DR-200 units were packaged in brown cardboard until approximately 2003, after which point in time they were packaged in white cardboard. In cross-examination, Mr Blackman’s evidence was shaken. He was uncertain when questioned on the differences between his affidavit and the invoices rendered to Dynamic Supplies, and showed a lack of knowledge about the subject matter of his affidavit. He acknowledged that Discover Group had defended several pieces of counterfeit litigation in the United States, some of them unsuccessfully. In light of these weaknesses in his evidence, I conclude that Mr Blackman’s evidence was of little weight.

REASONING ON TRADE MARK INFRINGEMENT CLAIM

Did Dynamic Supplies use the ‘BROTHER’ trade mark?

40 Counsel for Brother submits that the use of the ‘BROTHER’ trade mark on packaging and on business stationery such as invoices is a ‘use’ of the trade mark in relation to those goods. Brother contends that the fact that Dynamic Supplies imports and sells the products does not mean that it does not ‘use’ the products within the meaning of s 17 of the Trade Marks Act 1995 (Cth) (“the Act”). Brother says that a retailer who resells goods which it has bought and imported ‘uses’ the trade mark attached to those goods. This is said to be so in the present circumstances where the retailer receives counterfeit packaged goods and in circumstances where the infringing trade mark is applied not by the original manufacturer but by an overseas counterfeiter.

41 In response to this submission, Dynamic Supplies says that it has not ‘used’ the ‘BROTHER’ trade mark so as to contravene the Act. It maintains that the right of exclusive use conferred on Brother by s 20 of the Act only operates to prevent the sale in Australia of goods which are not Brother’s but which bear its trade mark. Counsel for Dynamic Supplies submits that the relevant question is whether the ‘BROTHER’ name and trade mark as applied indicate that the origin of the printer drum units is Dynamic Supplies or some other non-Brother source, a question which it says must be answered in the negative. Given that the goods in this case were in no relevant sense those of Dynamic Supplies, but were products of or made by Brother, it argues that its purchase and resale in the course of trade accurately indicated that the goods were those of Brother and that therefore Brother itself was the ‘user’ of the ‘BROTHER’ name and trade mark for the purposes of the Act. Dynamic Supplies also argues that it did not ‘use’ the ‘BROTHER’ trade mark as a trade mark when issuing invoices because the inclusion of the word ‘Brother’ on them was only for descriptive purposes; that is, as a shorthand way to identify or nominate the product which is the subject of the transaction and the invoice.

42 Counsel referred to several authorities in relation to the meaning of ‘use’. The term was considered by the High Court in Estex Clothing Manufacturers Pty Ltd v Ellis and Goldstein Ltd (1967) 116 CLR 254, where the respondent was an English manufacturer which sold its products to Australian retail traders for re-sale in Australia. In affirming the judgment of Windeyer J, the Full Court observed at 271 that:

‘… when an overseas manufacturer projects into the course of trade in this country, by means of sales to Australian retail houses, goods bearing his mark and the goods, bearing his mark, are displayed or offered for sale or sold in this country, the use of the mark is that of the manufacturer.’ (Emphasis added.)

Put another way, where an overseas company has registered a trade mark in Australia for products it exports to the Australian market, then it is that company, when and if it distributes the goods into Australia, which can be said to have ‘used’ its trade mark.

43 In R & A Bailey & Co Ltd v Boccaccio Pty Ltd (1986) 4 NSWLR 701, Young J considered the authorities on this point, including Champagne Heidsieck et Cie Monopole Societe Anonyme v Buxton [1930] 1 Ch 330. In Bailey 4 NSWLR at 709-710, Young J concluded that the right to exclusive use of a trade mark in Australia only operates to prevent the sale of goods in Australia “which are not the proprietor’s but which are marked with the proprietor’s mark”. A similar statement was made by Aickin J in Pioneer Kabushiki Kaisha v Registrar of Trade Marks (1977) 137 CLR 670 at 688 where, after referring to Estex 116 CLR 254, his Honour said:

‘It was not necessary in that case to consider whether the retailer also used the mark because the only relevant question was whether the registered proprietor himself had used the mark in Australia. There is no doubt that if the retailer had on the same basis imported goods other than those of the registered proprietor but bearing its mark, he would have used the mark by infringing it.’ (Emphasis added.)

44 In addition to the above, two other decisions of the Full Court of this Court are said to be relevant. The first is Transport Tyre Sales Pty Ltd v Montana Tyres Rims and Tubes Pty Ltd (1999) 93 FCR 421, where the Full Court confined the operation of Estex 116 CLR 254 “to the circumstances of that case”, and went on to hold at 440 that there had been ‘use’ of the trade mark by the retailer in Australia for the purposes of s 120 of the Act, but that it was excused by s 123. In Coca-Cola Company v All-Fect Distributors Ltd (1999) 96 FCR 107, the Full Court observed at 119 that a trade mark is infringed if it is shown that the alleged infringer has used the trade mark in such a way as to indicate that it is the source or origin of the goods.

45 These authorities illustrate two general principles. First, that where a foreign manufacturer projects a product into the course of trade in Australia, then that manufacturer retains the ‘use’ of any trade mark which attaches to that product. Secondly, a retailer in Australia ‘uses’ that mark as a trade mark if it applies the manufacturer’s mark to a product, thereby giving rise to infringement of the mark where there is no authorisation.

46 Neither of these general principles applies here. Brother’s lack of knowledge of the presence of its OEM products in Australia, and its specific intent to disassociate itself from the OEM products by removing its branding, means that it would be an odd result if it were held that Brother was the ‘user’ of the trade mark falsely applied to its product by a counterfeiter.

47 The authorities discussed above are different from the present case because here the foreign manufacturer manufactured the products, sold them without any branding and took steps to dissociate itself as the originator of the products. Brother did not in any way project or authorise the sale or distribution of the OEM products into the Australian market. Brother later became aware that, contrary to its policy, the product was retailed in Australia by Dynamic Supplies as a Brother-branded product in counterfeit packaging which prominently displayed the Brother name and trade mark. Authorities such as Estex 116 CLR 254 and Bailey 4 NSWLR 701 lay down principles in relation to their own peculiar facts and so the observations they make are not applicable to the facts of this case. The broad propositions noted above were made in quite a different commercial context.

48 I am of the opinion therefore, having regard to the state of the evidence before the Court and in particular the fact of counterfeiting (which I address at [70] below), that Dynamic Supplies and not Brother has ‘used’ the ‘BROTHER’ trade mark as provided by s 17 of the Act.

49 The term ‘origin’ is capable of different meanings which are contextually dependent. It may signify that the product bearing a manufacturer’s mark can be sourced to that manufacturer. It may also indicate that the product comes from a certain geographical location or climatic zone. In addition, ‘origin’ may identify qualities or characteristics of the product, such as an assurance that the product is made according to a particular manufacturer’s processes and standards; that it can be expected to be of a certain quality; that it will attract a manufacturer’s warranty; and, relevantly to the present case, that the manufacturer is willing to stand behind the product and have its name associated with it.

50 When a manufacturer takes steps to dissociate itself from a product by removing any trade mark and selling it as an OEM product, the manufacturer cannot be said to have ‘used’ a false copy of its trade mark which, without permission, is applied to its product by some disassociated entity in the distribution chain. In this case, Brother has disassociated itself from the OEM products which it sold to Company X. The express non-use of Brother’s name, reputation and trade mark was clearly a term of supply of the OEM product. The fact that a counterfeiter, after supply, repackaged the OEM products in false Brother packaging cannot support the submission that Brother was the ‘user’ of the mark.

51 In some circumstances, a retailer or importer may be said to lawfully ‘use’ a trade mark owned by an overseas manufacturer: see Transport Tyre 93 FCR at 440; Pioneer 137 CLR at 688; W.D. & H.O. Wills (Australia) Ltd v Rothmans Ltd (1956) 94 CLR 182 at 188. However, where a retailer imports for sale goods which are in packaging bearing a counterfeit trade mark, that importation will be an infringing ‘use’ of the mark. This is an application of the principle accepted by Lindgren J in Playboy Enterprises International Inc v Hong (2004) 63 IPR 533 at 538 and briefly described in Blanco White TA and Jacobs R, Kerly’s Law of Trade Marks and Trade Names (12^th ed, Sweet & Maxwell, 1986) at [14-13].

52 The fact that Dynamic Supplies received counterfeit-packaged printer drums and not goods which themselves bore a counterfeit mark is immaterial to the application of the principle to the present case. This is because the purchase, importation and sale of the printer drums in the counterfeit packages with the associated stationery bearing the counterfeit Brother name is sufficient to amount to a ‘use’ of a trade mark connected and in relation to those products. Accordingly, I find that Dynamic Supplies ‘used’ the ‘BROTHER’ trade mark when it imported, distributed, offered for sale and sold the Sample Units. In addition, I reject the submission that inclusion of the Brother name on invoices by Dynamic Supplies was merely descriptive and not ‘use’ by Dynamic Supplies of the ‘BROTHER’ trade mark, because the word ‘BROTHER’, by itself, does not describe any characteristics, functions or features of the actual product. Rather, it serves entirely to indicate the product’s source and origin, and is a ‘use’ of the branding for the purposes of the Act.

53 A further basis on which I find that Dynamic Supplies ‘used’ the ‘BROTHER’ trade mark is based on the Act. Sections 7(4) and 9 of the Act read as follows:

‘7 Use of trade mark

(4) In this Act:

use of a trade mark in relation to goods means use of the trade mark upon, or in physical or other relation to, the goods …

9 Definition of applied to and applied in relation to

(1) For the purposes of this Act: …

(b) a trade mark is taken to be applied in relation to goods or services:

(i) if it is applied to any covering, document, label, reel or thing in or with which the goods are, or are intended to be, dealt with or provided in the course of trade; …

(ii) in an invoice, wine list, catalogue, business letter, business paper, price list or other commercial document; …

(2) In subparagraph (1)(b)(i):

covering includes packaging, frame, wrapper, container, stopper, lid or cap.’

(Emphasis added.)

54 Section 7(4) defines ‘use’ of a trade mark not only as the application of the mark to the product itself, but also the application of the mark to other items relating to the product, such as packaging, invoices, correspondence and advertisements: see Thunderbird Products Corporation v Thunderbird Marine Products Pty Ltd (1974) 131 CLR 592 at 600 (per Jacobs J); Angoves Pty Ltd v Johnson (1982) 43 ALR 349 at 359-360 (per Deane J); Davison M, Johnston K and Kennedy P, Shanahan’s Australian Law of Trade Marks & Passing Off (3^rd ed, Lawbook Co., 2003) at [2.145] and [2.230]. Sections 9(1)(b)(i), 9(1)(c)(ii) and 9(2) of the Act provide that a trade mark used on an invoice or attached to either the packaging in which the product is stored or transported is to be taken as being applied in relation to the goods. Accordingly, the use of the Sample Packaging or invoices displaying the mark in respect of the Sample Units is ‘use’ of a trade mark within s 7 of the Act.

Is the use by Dynamic Supplies conducted in the course of trade?

55 To make out its case on infringement, it is necessary for Brother to demonstrate that Dynamic Supplies’ ‘use’ of the ‘BROTHER’ trade mark was done in the course of trade. This is because part of the definition of a trade mark given by s 17 of the Act requires that the sign which comprises the mark must be used in the course of trade.

56 This issue was not significantly disputed in this case. According to counsel for Brother, it was raised simply “to be comprehensive about the issues that would have to be addressed”.

57 It is clear on the evidence that Dynamic Supplies imported, received, bought and then sold the Brother products in the course of its business in Australia. The evidence of Mr Piccinini that Dynamic Supplies bought the products and then sold them to purchasers in Australia is sufficient to establish this element. This is a classic form of trade.

Are Brother’s products covered by its Australian trade marks?

58 Brother says that Dynamic Supplies’ use of the Brother name on the Sample Units is a use in relation to goods in respect of which Brother’s Australian trade marks are registered.

59 Brother says that printer drum units are “apparatus for the transmission and/or reproduction of images”, and that they therefore fall within class 9 of schedule 1 to the Regulations. The printer drum units, it says, also fall within the scope of the registration of Brother’s Australian registered trade marks. The phrase “all other goods in class 9” in registered trade marks 440897 and 479966 and the phrase “drum units” in registered trade mark 1000137 both cover printer drum units, such as the Brother DR-200. In addition, Brother submits that printer drum units are parts, accessories and/or attachments of other devices which fall within class 9 – namely facsimiles, printers, photocopiers and multi-function devices – and which therefore fall within the specifications for registered trade marks 440897, 479966 and 1000137.

60 As for the cardboard packaging in which the Brother DR-200 units are stored and transported, Brother submits that it is a ‘good’ falling within the scope of class 16 of schedule 1 to the Regulations, and covered by the phrase “all other goods in class 16” in the specifications for registered trade mark 479964.

61 Brother rejects the submission that there is any necessary distinction between goods which are ‘parts’ and goods which are ‘consumables’. The concept of ‘consumables’, it says, is irrelevant. It argues that a good can be both a ‘part’, ‘accessory’ or ‘attachment’ and a ‘consumable’, particularly where there is no exclusive meaning which the industry gives to the term ‘consumable’. Brother emphasises the way in which printer drum units are used in printers and facsimiles, stating that they are indispensable to the working of and form part of the devices. The fact that the printer drum units may wear out and be replaced during the life of the printer is not definitive or even relevant. Irrespective of whether Brother DR-200 units are classified as ‘parts’ or ‘consumables’, they fall within class 9 of schedule 1 to the Regulations and are covered by the specifications of Brother’s Australian trade marks 440897, 479966 and 1000137.

62 In response, Dynamic Supplies submits that Brother’s Australian trade marks do not cover printer drum units and cardboard box packaging. It is said that the specifications of only registered trade mark 440897 are relevant, because the specifications of the other trade marks either do not specify “printer drum units” (trade marks 479964 and 479966) or were registered after the conduct of Dynamic Supplies impugned by Brother (trade mark 1000137).

63 Dynamic Supplies submits that the absence of the term ‘consumable’ in the specifications means that the printer drum units are not covered, and that to extend the meaning of the words “parts … and accessories” in the specifications of trade marks 440897, 479964 and 1000137 to include consumables would be incorrect because a consumable is essentially not a part, accessory or attachment. It says that an entirely new trade mark registration is required to cover printer drum units which are ‘consumables’.

64 In addition, Dynamic Supplies submits that class 9 does not extend to printer drum units. It points to the absence of evidence that the units are used for the “transmission or reproduction of images”, reiterating that printer drum units are consumables rather than a type of apparatus covered by class 9.

65 The central question arising is whether the term ‘consumables’ falls within the ordinary dictionary meaning or terms in the specifications of Brother’s Australian trade marks, in particular, the terms ‘parts’, ‘accessories’ and ‘attachments’. The dictionary definition of ‘accessory’ has been considered in the authorities and has been described as “an additional or subordinate thing; an adjunct, an accompaniment; a minor fitting or attachment”: see Nokia Corporation v Truong (2006) 66 IPR 511 at 516.

66 I accept Brother’s submissions that printer drum units are apparatus for the transmission or reproduction of images, and that the categorisation of a printer drum unit as a ‘consumable’ does not take it outside the description of a ‘part’, ‘accessory’ or ‘attachment’. The evidence of both parties’ witnesses indicates that printer drum units are part of the internal working of printers, facsimiles and multi-function devices. They are called consumables because they are parts or accessories with a limited life span, which is generally shorter than the life span of the machine in which they function. Although printer drum units are not fixed permanently within the machines and are removable for replacement, the machines cannot function without them. Given this essential role of the printer drum units, it is wrong to characterise them on the basis they are not a part of or an accessory to those machines. Accordingly, the proper conclusion is that trade marks 440897, 479964 and 1000137 are registered in respect of Brother’s printer drum units, such as the Brother DR-200. I also accept Brother’s submission that the cardboard box in which a printer drum unit is packaged is itself a ‘good’ made of cardboard falling within the scope of both class 16 and the specifications of registered trade mark 479964. Indeed, there was little genuine dispute on this point.

67 However, despite my finding that printer drum units are covered by the specifications of trade marks 440897, 479964 and 1000137 (and cardboard packaging by the specifications of trade mark 479966), in my view, Dynamic Supplies’ submission that registered trade mark 1000137 was registered only after the conduct of Dynamic Supplies impugned by Brother, and therefore was not breached by that conduct, is correct. The trap purchases in this case were made in late February and early March 2004, and Brother did not register trade mark 1000137 until 30 April 2004. It is not possible, therefore, for registered trade mark 1000137 to be infringed by Dynamic Supplies’ conduct in the same way the remainder of Brother’s Australian trade marks have been.

68 For these reasons, I find that both the Brother DR-200 units and Brother DR-200 packaging are goods in respect of which Brother’s Australian trade marks are registered, but that trade mark 1000137 has not been infringed by the Dynamic Supplies’ conduct.

Did Dynamic Supplies have Brother’s consent?

69 A respondent which uses an applicant’s registered trade mark in the course of trade in relation to goods which fall within the scope of the mark’s specifications will not infringe the mark if the use was with the consent of the applicant: see s 123 of the Act.

70 Before considering the relevant provisions of the Act, it is necessary to make a finding of fact in relation to whether the Sample Packaging was a counterfeit of genuine Brother DR-200 packaging. The evidence shows that there are significant differences between the Sample Packaging and genuine Brother DR-200 packaging. These include differences in the flute profile which is made up of the number of corrugations in the middle wavy layer of cardboard, the use of brown coloured cardboard instead of white coloured cardboard, differences in the typeface of various English and Japanese words printed on the cardboard, and the use of a “smooth” finish in the cuts of the cardboard rather than a “puckered” finish. Evidence of these differences was adduced by Mr Murase, whose credibility and expertise in this matter I accept at [24] above. Accordingly, having regard to this evidence and the submissions of counsel on this point, I find that the Sample Packaging is a counterfeit of the genuine Brother DR-200 packaging.

71 Section 123(1) of the Act provides:

‘123 Goods etc. to which registered trade mark has been applied by or with consent of registered owner

(1) In spite of section 120, a person who uses a registered trade mark in relation to goods that are similar to goods in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied to, or in relation to, the goods by, or with the consent of, the registered owner of the trade mark.’

72 The onus is on Dynamic Supplies, raising the defence, to establish it. Dynamic Supplies contends that the application of Brother’s Australian trade marks was done with licence or authority. Although the evidence indicates that Discover Group did not source all of its Brother DR-200 units from Brother America (via All Day Trading), Dynamic Supplies says the evidence establishes that, on the balance of probabilities, the Sample Units it imported from Discover Group were sourced originally from Brother America. It also argues that, as a matter of reasonable inference, Brother America must have unwittingly sourced these products from Brother Japan or Brother International, which had erroneously sent Brother America rather than Company X the Sample Units. This is said to be sufficient to discharge Dynamic Supplies’ onus under s 123 of the Act. Dynamic Supplies maintains that it cannot, and is not obliged to, trace the provenance of the Sample Units and Sample Packaging back to Brother Japan because any such evidence, particularly where it may involve Company X, is within the exclusive knowledge of the applicants.

73 Brother’s case is that they did not licence or authorise any third party to apply the ‘BROTHER’ trade mark to the Sample Packaging. It says that Dynamic Supplies did not establish the chain of supply of the Sample Units back to Brother America, and relies on the acknowledgement by Mr Piccinini in cross-examination that it would be unlikely that Brother America would receive OEM products from Company X and sell them in counterfeit packaging with the wrong bar code and with false stickers. Brother notes that in cross-examination Mr Blackman was unable to demonstrate that all of the Brother DR-200 units which he told Mr Piccinini had been obtained from Brother America was supported by Discover Group’s records. Several purchases which Mr Blackman in his affidavit stated were made from All Day Trading were not shown to be sourced from Brother America, therefore demonstrating that the chain of supply is not established back to Brother America and that Brother cannot be deemed to have impliedly consented to the application of its trade mark to the Sample Packaging. Brother also submits that, even if the evidence did establish a chain of supply with Brother America, any such link would not, of itself, be sufficient to avail Dynamic Supplies of the defence under s 123 because it still had not obtained the consent of the registered owner of the infringed trade mark, namely Brother Japan.

74 As pointed out in Davison M, Johnston K and Kennedy P, Shanahan’s Australian Law of Trade Marks and Passing Off (3^rd ed, Lawbook Co., 2003) at [19.40], the “critical issue in the context of the defence under s 123 of the Act … is whether the registered owner in Australia has consented to the application of the trade mark to the goods”. Although that observation was made in the context of passing-off claims, it is equally applicable to cases, such as the present case, where the registered owner of the trade mark did not apply or authorise the application of its mark to or in relation to the goods in question. Accordingly, in order to make out a defence under s 123 of the Act, Dynamic Supplies must demonstrate that the application of the ‘BROTHER’ trade mark was done with Brother Japan’s express or implied consent.

75 Dynamic Supplies has not established that Brother Japan expressly or implicitly licensed or authorised the application of the ‘BROTHER’ trade mark to the Sample Units. Its submissions fail on two counts.

76 The first is that it has not established on the evidence that the chain of supply of the Sample Units and Sample Packaging traces back to Brother America, let alone to Brother Japan. Although the evidence shows that Brother America imports Brother DR-200 units only from Brother Japan or Brother International and on-sells them with little or no inspection, the evidence does not go so far as to demonstrate that the specific Sample Units and Sample Packaging were sold by Brother America to Discover Group. Without establishing this essential link in the supply chain, Dynamic Supplies has not shown any consent, express or implied, by Brother America or Brother Japan for the purposes of s 123 of the Act.

77 I do not accept that a reasonable inference is available that Discover Group sourced the Sample Units from Brother America. The records of Discover Group indicated that some of the Brother DR-200 units which it said it acquired from Brother America could have come from another source. Mr Blackman’s evidence on this point was less than satisfactory. Simply because it is shown that Discover Group purchases some Brother DR-200 units from Brother America does not necessarily mean that there is a proper inference or a balance of probabilities that these particular trap purchases were originally sourced from Brother America. Nor do I accept the inference that Brother America must have accidentally received the products from Brother Japan or Brother International. The evidence that the Sample Units were made by Brother Japan for Company X and that Brother America only sources its Brother DR-200 units from Brother Japan or Brother International does not support such an inference.

78 The second ground on which Dynamic Supplies’ submissions fail is that even if Brother America was part of the supply chain, it has not demonstrated that Brother Japan, the registered owner of the relevant trade marks, expressly or impliedly consented to the application of its trade mark to or in relation to the goods in question. Although the Full Court of this Court in Transport Tyre 93 FCR at 440 found that the sale of the goods in question constituted a ‘use’, which was excused by s 123 of the Act, that decision is distinguishable. In that case the registered owner of the trade mark applied it to the goods which were subsequently sold. The chain of supply could be traced back from the retailer of the goods to the registered owner of the trade marks which were applied to or in relation to those goods. The registered owner’s consent for the purpose of s 123 was, in the opinion of the Full Court, necessarily implied in those circumstances. No such chain of supply exists in the present case. The Sample Units were not branded by Brother with its mark, and the Sample Packaging was counterfeit. No consent, whether express or implied, was given by Brother to any person or entity to apply its registered trade mark to the products. To the contrary, Brother has distanced itself from the OEM products, manufacturing them only as unbranded products and selling them only through a confidential arrangement with Company X.

79 In any event, a finding that Brother America was part of the supply chain of the impugned products would not allow Dynamic Supplies to rely on s 123 of the Act because it is the consent of the registered owner which must be acquired. Here, Brother Japan is the registered owner of Brother’s Australian trade marks. There is no evidence, and Dynamic Supplies submitted that it should not be expected to adduce such evidence, that Brother Japan (rather than Brother America) consented to the application of its mark to or in relation to the products in question. The fact that Brother America and Brother Japan are related entities within the same corporate group does not affect the clear and ordinary meaning and operation of s 123 of the Act. The consent to apply Brother’s Australian trade marks to or in relation to a product must be acquired from Brother Japan. The situation where consent is not acquired from the registered owner of the trade mark but from a related entity in its corporate group has not, so far as I am aware, been considered in Australian law: cf the decision of the English Court of Appeal, which was decided on the basis of significantly different legislation in Revlon Inc v Cripps and Lee [1980] FSR 85. I am of the view that Brother Japan’s consent for the purposes of s 123 of the Act is not to be implied from the fact that another member of the Brother corporate group may have, contrary to my finding, given its consent.

80 Accordingly, Dynamic Supplies’ use of the ‘BROTHER’ trade mark was not done with the licence or authority of Brother Japan. I therefore find that its infringement of Brother’s Australian trade marks is not excused by s 123 of the Act.

REASONING ON TRADE PRACTICES CLAIM

81 Although there was some uncertainty during the hearing as to whether Dynamic Supplies had conceded that Brother had a reputation for the purposes of ss 52 and 53 of the TPA, Dynamic Supplies’ ultimate position was that it acknowledged Brother’s reputation, but said that its acknowledgment did not constitute a concession as to Brother’s trade practices claim. There was no substantial dispute between the parties on this, nor was there significant cross-examination by counsel for Dynamic Supplies on the issue. The uncontested evidence led by Brother showed that Brother Australia has been active in Australia since 1977 and that its sales run into the tens of millions of dollars. Advertisement of its products has been extensive. In cross-examination, Mr Piccinini acknowledged that Brother is a “well-known brand”.

82 I find therefore that the applicants have a sufficient reputation in the ‘BROTHER’ name and trade mark. The central issue in relation to Brother trade practices claim are whether Dynamic Supplies’ conduct involved a misrepresentation prohibited by ss 52 and 53 of the TPA and whether its conduct constituted passing off.

Did Dynamic Supplies’ conduct involve a misrepresentation in breach of ss 52 and 53?

83 Brother submits that the importation, distribution, offering for sale and sale by Dynamic Supplies of the Sample Units involved a misrepresentation by it that they were genuine Brother DR-200 units. Specifically, three misrepresentations are alleged. Brother submits that, by selling the products in packaging and using invoices which identify the products as genuine Brother DR-200 units, Dynamic Supplies falsely represented: (i) that the ‘BROTHER’ trade mark was used with Brother’s licence or authority; (ii) that the products in the boxes were of the composition, style and model of genuine Brother DR-200 units; and (iii) that the products attracted the same warranty as genuine Brother DR-200 units.

84 Brother submits that each misrepresentation contravenes ss 52 and 53(a), (c), (ea) and (g) of the TPA because the use of the ‘BROTHER’ name by Dynamic Supplies is likely to mislead or deceive members of the public into thinking that the Sample Units sold by Dynamic Supplies were in some way promoted, warranted or distributed by Brother, or at least with Brother’s consent or approval, when in fact they were not. By selling the Sample Units in packaging and with invoices identifying them as genuine Brother DR-200 units, Dynamic Supplies is said to be falsely representing that they originated from Brother Japan as genuine Brother DR-200 units and had the full backing which Brother gives to its branded products.

85 In response to these submissions, Dynamic Supplies denies that it made representations alleged. Dynamic Supplies relies on Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 605 (per Gleeson CJ, Hayne and Heydon JJ), and submits that, when selling the trap purchase products, it did no more than communicate what was represented by Brother, without adopting or endorsing it. It was a mere conduit in the distribution process. Dynamic Supplies also reiterates that Brother’s Australian trade marks were not registered in relation to the Sample Units, and that Dynamic Supplies did not ‘use’ the trade marks.

86 In light of my findings above at [52], [54] and [68], Dynamic Supplies’ submissions on non-use and non-registration do not succeed in relation to the trade practices claim.

87 The remaining issue is whether Dynamic Supplies merely communicated a representation made by Brother or whether it represented that the products were in some way connected with Brother when they were not.

88 In Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45, the High Court held at 88 that the use of the brand “Nike” was likely to mislead or deceive members of the public into thinking that “Nike Sports Fragrance” was “in some way promoted or distributed by Nike International itself or with its consent or approval”. The Full Federal Court in Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2000) 104 FCR 61 at 73 and 77 adopted a similar approach, finding that the evidence established that the respondent had used the appellant’s name in a way which gave rise to a misrepresentation that “in some way” the respondent acted with the appellant’s approval. It is not necessary to be more precise, provided the association is more than de minimis.

89 Having regard to the evidence in this case, I find that Dynamic Supplies’ conduct was likely to mislead members of the public into believing that the trap purchases were in some way promoted or distributed by Brother or with its consent, when in fact they were not. Put another way, the use of the name gives rise to the making of a connection with Brother and its reputation. The packaging and invoices identified the Sample Units as genuine Brother DR-200 units when, to the contrary, they were OEM products not branded with the Brother trade mark and sold exclusively to Company X. This suffices to establish a breach of ss 52 and 53(a), (c), (ea) and (g) of the TPA. In oral submissions counsel for Dynamic Supplies submitted that it was merely a conduit for the impugned products, and had no part in the counterfeiting or the packaging of Sample Units, but its intention in this case is irrelevant. In some cases intention may be relevant to support an inference of deception, but not here. Objectively, its misrepresentations were made in the course of trade and commerce and were likely to mislead or deceive, and this is sufficient to establish a breach of ss 52 and 53: see Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 223 (per Stephen J); Given v CV Holland (Holdings) Pty Ltd (1977) 29 FLR 212 at 217.

Did Dynamic Supplies’ conduct constitute passing off?

90 The reasons given in relation to a breach of the TPA also support the finding that Dynamic Supplies’ conduct constitutes passing off. The packaging and invoices passed off the Sample Units as genuine Brother DR-200 units when, to the contrary, they were OEM products not branded with the Brother trade mark.

91 Accordingly, I find that Dynamic Supplies engaged in the tort of passing off.

REASONING ON CROSS-CLAIM

92 Dynamic Supplies’ cross-claim alleges that Brother’s refusal of warranty claims in respect of three defective Brother DR-200 units, on the basis that they were not genuine Brother products, renders Brother liable under ss 74D and 74H of the TPA. Section 74D gives a consumer a right of action against a manufacturer of goods which are not of merchantable quality, and s 74H provides that a seller of defective goods, liable to a consumer for loss or damage suffered as a result of the goods not being of merchantable quality, has a right of indemnity against the manufacturer of those goods.

93 Brother submits that it cannot be liable because it has not engaged in trade or commerce in Australia within the meaning of the TPA. Its arrangements for supply of OEM products was for supply from Japan exclusively to Company X in Hong Kong. Brother relies on the definition of ‘trade and commerce’ in s 4 of the TPA:

‘“trade or commerce” means trade or commerce within Australia or between Australia and places outside Australia’. (Emphasis added).

Brother submits that its trade in OEM products was not conducted within Australia or between Australia and another country, and therefore the TPA cannot apply. Brother also submits that Dynamic Supplies has not established that the specific printer drum units the subject of the cross-claim were in fact defective. It points out that the units were not produced to the Court, and submits that the only evidence is the denial of the warranty claims by Brother on the basis that the units were not genuine Brother products. This insufficiency is exacerbated by the lack of supporting documentation recording specific alleged faults in the specified units, including the lack of a test sheet and inconclusive information on the records and documentation when the units were returned.

94 Dynamic Supplies submits that Brother Japan was engaged in ‘trade and commerce’ within the meaning of s 4 of the TPA because the provenance of the units can be traced from Australia back though America and ultimately to their manufacturer in Japan. It submits that it there is sufficient evidence of defectiveness of the units. Mr Piccinini deposed that the units were returned to Dynamic Supplies by customers, who then received a refund. Counsel for Dynamic Supplies submitted that the only commercially sensible inference is that the refund was paid because the units were defective. This evidence is supported, it is said, by inferences to be drawn from a consistent pattern according to which defective units were replaced by Brother Australia and the thoroughness of the practices by which Mr Dobrowolski of Brother Australia inspected and tested the units. Dynamic Supplies also submits that, since it is agreed that Brother Japan manufactured the products, there is no difficulty in establishing that Brother bears the liability rather than Dynamic Supplies: see Leeks v FXC Corporation (2002) 118 FCR 299 at 302.

95 The cross-claim must fail in this case due to the lack of sufficient evidence establishing the defectiveness of the units. The assertion by Mr Piccinini that Dynamic Supplies provided refunds to its consumers is not sufficient evidence of the defectiveness of the units. There are no details of specific defects or their nature and extent. Refunds may be given for many reasons other than discovery of a fault in the product, for example, to maintain goodwill, for public relations purposes, to enhance reputation, or as a matter of general corporate policy when goods are claimed to be defective. Normally, a retailer making a claim under ss 74D and 74H will adduce some specific evidence in the form of documents, photographs or statements, as to the fault and give evidence as to how the product fails to function properly and why it has been deemed defective. In cases such as the present where the product can no longer be obtained, at least some evidence identifying the type of defect, and when and how the defect was ascertained in the particular products, should be adduced. This evidence may be in the form of, for example, test sheets, affidavits by the person who inspected and identified the defect, or documentation which identifies the defective product and its defects. The inferences which Dynamic Supplies submits should be drawn in this case are not open on the sparse evidence adduced.

96 In light of my finding that the evidence does not establish the defectiveness of the units, it is not necessary for me to express an opinion on Brother’s submission that it has not engaged in ‘trade and commerce’ for the purposes of TPA. Accordingly, I do not propose to deal with that question in these reasons.

97 For these reasons, the cross-claim should be dismissed.

CONCLUSION

98 I allow the applicants’ claim that the respondent has infringed the registered trade marks, and has engaged in misleading and deceptive conduct in contravention of ss 52 and 53 of the TPA and the tort of passing off. I dismiss the respondent’s cross-claim. I direct the applicants to draft, file and provide to the respondent Draft Short Minutes of Orders in respect of the precise form of the orders arising out of these reasons for judgment, costs and directions as to the future conduct of these proceedings.

I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Associate:

Dated: 26 September 2007

Counsel for the Applicants	Mr R Macaw QC and Ms J Baird

Solicitor for the Applicants	Corrs Chambers Westgarth

Counsel for the Respondent	Mr G Clarke SC and Mr R Millar

Solicitor for the Respondent	Home Wilkinson Lowry

Dates of Hearing:	4, 5, 6, 12, 13 and 14 June 2007

Date of Judgment:	26 September 2007

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