In a recent decision of the Federal Court in The Polo/Lauren Company v Ziliani Holdings  FCA 49, Polo/Lauren failed in its attempt to restrain the importation into and sale of clothing in Australia bearing the fashion house's signature polo player logo. The case involved the question of whether a symbol, when lawfully embroidered overseas into the external surface of clothing, is protected by copyright within the provisions of the Copyright Act 1968 (Cth) so that it may not be imported for sale in Australia without the consent of the person entitled to the Australian copyright.
The respondent, Adam Ziliani, operated a clothing retail business in Sydney which sold designer labels manufactured in the US such as Ralph Lauren, Calvin Klein, Tommy Hilfiger and DKNY, at a discount price. This practice is known as parallel importation, whereby genuine goods are sourced from overseas markets at a lower price for sale in Australia. Following changes to the copyright law in 1998, which relaxed one of the key prohibitions on parallel importation, the practice has accelerated in Australia. Concern has subsequently been expressed regarding the potential for trade mark and copyright infringement.
Prior to this decision, copyright law was considered by the owners of logos as the principal means available to prevent parallel importation of goods without their consent. Although in this case there was no dispute that the articles of clothing were genuine designer goods, Mr Ziliani was not a licensee of Ralph Lauren in Australia. Polo/Lauren Co, the Australian assignee of Ralph Lauren's rights in the iconic polo player logo, thereby alleged a breach of copyright pursuant to sections 37 and 38 of the Copyright Act 1968 (Cth) ("the Act").
In response, Mr Ziliani submitted a defence under section 44C of the Act on the basis that the logo embroidered onto the clothing was actually a "label" which is exempt from copyright protection laws being a "non-infringing accessory". Further, he contended that section 77(2) of the Act afforded a defence, as the embroidered logo was a corresponding design' which may be reproduced without infringing copyright in the original artistic work.
"Non-infringing accessory" defence
The exception in section 44C requires that firstly, the artistic work (here the polo player logo) must have been used in the country of manufacture with the licence of the person entitled there to copyright, and secondly, it be an "accessory." As there was no dispute that the clothing was manufactured lawfully in the US, Rares J proceeded to consider whether the embroidered polo player could fall within the definition of "accessory". Under section 10(1) of the Act, "accessory" is defined as including:
"a) a label affixed to, displayed on, incorporated into the surface of, or accompanying the article;"
Based on the ordinary English meaning of "label", which he construed broadly to include the brand name, trade mark or name by which a fashion house is generally known, such as Ralph Lauren', Rares J concluded that the embroidered polo player constituted an "accessory" for the purposes of the Act. In other words, the Court held that the signature polo player logo had the effect of identifying or "labelling" the clothing as the product manufactured by the Ralph Lauren group. Accordingly, the defence under section 44C was established and Polo/Lauren Co's claim failed.
"Corresponding design" defence
Under section 77(2) of the Act, it is not an infringement of the copyright in an artistic work sold in Australia to reproduce the work by embodying a "corresponding design" in a product. "Corresponding design" is defined in section 74 as "visual features of shape or configuration which, when embodied in a product, result in a reproduction of that work."
Rares J rejected Polo/Lauren Co's submission that the introductory wording of sections 37 and 38 limited the availability of this defence. In Rares J's opinion, as long as the conditions in section 77(2) are met, a person has the right to make a reproduction of the work in Australia.
In relation to the question of whether the logo was a "corresponding design", Mr Ziliani argued that the logo depicted the shape or configuration of a polo player on a horse and that once it had been embroidered into the fabric of a garment, there was a reproduction of the artistic work (being the polo player design), which did not constitute an infringement of copyright by virtue of section 77(2).
Polo/Lauren disputed that the polo player logo could be described as features of "shape and configuration", and should more properly be regarded as a mere surface design or pattern'. They relied on comments made in Copyright and Designs (Butterworths) at [64,340], that "shape or configuration" is generally taken to refer to three-dimensional elements as opposed to two-dimensional patterns.
However, Rares J held that the embroidered polo player logo did fall within the definition of "corresponding design" in section 74 of the Act because it has a visual "shape or configuration" by reason of the alteration in fabric created by embroidering the logo. Embroidery, unlike printing, is raised above the surface of the garment and changes the texture and shape of the fabric to which it is applied.
Accordingly, the alternate defence under section 77(2) was made out, and Polo/Lauren's claim failed on the second ground.
The case of The Polo/Lauren Co LP v Ziliani Holdings Pty Ltd  FCA 49 further opens the door to parallel importation in Australia and adds another impediment to the ability of trade mark owners to stop the practice.
It remains to be seen whether this decision will be confined on its facts to the specific situation of an embroidered logo as opposed to a printed design. In the gap left behind, passing off and misleading and deceptive conduct claims will now need to be the focus of brand owners faced with the parallel importation challenges.
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