Parallel imports: consent by conduct

Parallel imports: consent by conductAmanda Easey and Rohan Massey*

The decisions of the Court of Appeal for England andWales in Mastercigars Direct Ltd v Hunters & FrankauLtd1 and, more recently, of the Chancery Division inHonda v Neesam2 have wide implications for trade markproprietors and parallel importers. These cases demon-strate that it is possible for a parallel importer of trademarked goods into the European Economic Area3

(‘EEA’) to show that the trade mark proprietor providedimplied consent to the imports by their actions, despitethe fact that no express consent was given.

This article provides an overview of how the ques-tion of implied consent has been addressed by theEnglish courts in light of guidance from the EuropeanCourt of Justice (‘ECJ’).

The legal backgroundThe relevant legislation includes Articles 5 and 7 ofDirective 89/104 (the ‘Trade Mark Directive’) whichwas implemented in the UK by the Trade Marks Act1994. Under Article 5.1 of the Trade Mark Directive, atrade mark proprietor has exclusive rights to preventall third parties not having his consent from using inthe course of trade any sign which is identical with thetrade mark in relation to goods or services which areidentical with those for which the trade mark is regis-tered. These rights include the right to prohibit theimport or export of goods under the sign or mark.

Article 7 of the Trade Mark Directive provides anexception to those rights:

The trade mark shall not entitle the proprietor to prohibitits use in relation to goods which have been put on themarket in the Community under that trade mark by theproprietor or with his consent.

A trader may therefore, with limited exceptions, pur-chase trade marked goods put on the market by thetrade mark proprietor in one Member State and resellthem in another Member State. The reference tothe Community now covers the EEA by virtue of theEEA Agreement.4 In the UK, the provisions of Article 7

were implemented by section 12 of the Trade MarksAct 1994.

Parallel imports and the exhaustionof rightsA parallel importer is a trader who obtains supplies ofgenuine trade marked products from overseas and placesthem on the market in competition with authorized dis-tributors of the trade mark proprietor. Article 7 of theTrade Mark Directive applies to goods which have beensold for export outside the EEA and subsequentlyimported and placed on the market in the EEA.

Although it is not unlawful to purchase the productsoutside the UK, the placing of goods bearing a trademark on the UK market may be prevented unless either(a) the proprietor of the trade mark has given consentor (b) those particular goods have already been placed

* Dr Amanda Easey, Associate, IPM&T Group, McDermott, Will & EmeryUK LLP, [email protected] and Rohan Massey, Partner, IPM&TGroup, McDermott, Will & Emery UK LLP, [email protected].

1 [2007] EWCA Civ 176; [2007] RPC 565.

2 [2008] EWHC 338, 28 February 2008.

3 The EEA is composed of the Member States of the European Union plusIceland, Liechtenstein, and Norway.

4 The Agreement on the European Economic Area, which came into forceon 1 January 1994.

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# The Authors (2008). Published by Oxford University Press. All rights reserved.

Key issues

† Proprietors of registered trade marks mayprevent third parties from importing, withoutconsent, goods bearing the marks into the EEA.The circumstances under which such consentmay be given, according to the guidance of theEuropean Court of Justice, have been a matterfor debate.

† Recent decisions of the English courts havedemonstrated that, in the absence of expressconsent, a trade mark proprietor may be con-sidered in certain circumstances to have givenimplied consent to parallel imports of trademarked goods into the EEA.

† This article reviews the relevant English case lawon implied consent for parallel imports and con-siders the steps a trade mark proprietor shouldtake in order to avoid being deemed to havegiven such consent. at U

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on the market by the proprietor of the trade mark oranother party with consent. The latter situation, pro-vided by Article 7 of the Trade Mark Directive, isreferred to as ‘exhaustion of rights’ and permits thesale of second-hand goods without interference by thetrade mark proprietor; once a new product is sold onthe market, the trade mark rights are exhausted.

The ECJ considered the scope of Article 7 in anumber of cases5 culminating in the decision in JoinedCases Zino Davidoff SA v A&G Imports Limited and LeviStrauss and Co v Tesco Stores Limited6 (‘Davidoff ’). Inthis leading decision, the ECJ set out guidelines fordetermining the nature of consent and emphasized thatthe concept of consent was not a matter for the nationallaws of each Member State. As consent amounts to arenunciation of the trade mark proprietor’s right, itmust be unequivocally demonstrated, which wouldnormally be by an express statement of consent. It ispossible, however, for consent to be inferred from theparticular facts and circumstances of the case. It is forthe trader alleging consent to prove that it was given,and such consent cannot be inferred from:

† mere silence, or

† the fact that the trade mark proprietor has not com-municated his objection to the goods being mar-keted within the EEA or the fact that the goods donot carry a warning that they should not be mar-keted within the EEA or

† the facts that the goods were transferred withoutcontractual reservations or, according to the law gov-erning the contract, the property right included, inthe absence of such reservations, an unlimited rightof resale or at least a right to market the goods sub-sequently in the EEA.

There may be circumstances from which consent maybe inferred, but it is an actual consent and not adeemed consent that must be established. Article 7,therefore, represents a concept which is to have thesame meaning in all national courts of the EU statesand which does not depend on domestic law.

The ECJ decision in Van Dorenþ Q GmbH v LifestyleSportsþ sportswear Handelsgesellschaft mbH and MichaelOrth7 placed a further qualification on the requirementthat it is for the parallel importer to prove consent. Thecourt held that, if the parallel importer can establish thatthere is a ‘real risk’ of partitioning of national markets ifhe bears the burden of proof, particularly where the

trade mark proprietor uses an exclusive distributionsystem in the EEA, the burden of proof shifts to thetrade mark proprietor to establish that the productswere initially placed on the market outside the EEA byhim or with his consent. Only then is the parallelimporter required to demonstrate the consent of thetrade mark proprietor to subsequent marketing in theEEA. The decision raises the questions of how a parallelimporter is meant to demonstrate that there is a ‘realrisk’ of market partitioning and as to the evidencewhich a trade mark proprietor must adduce in order toshift the burden back to the parallel importer.

The effect of these provisions is that traders can usetrade marks to partition the market in the EEA fromthe rest of the world in order to maintain price differ-entials between those markets, a situation which hasbeen called ‘fortress Europe’.

Early casesBefore the Court of Appeal’s decision in Mastercigars,there were numerous cases in the English courts inwhich parallel importers attempted and failed to estab-lish implied consent. Although each was decided on itsown facts, the decisions were generally considered tosupport the view that demonstrating implied consentwas virtually impossible. Laddie J was quoted as sayingof the ECJ decision in Davidoff during the hearing ofHewlett-Packard Development Company v Compaq (dis-cussed below) ‘If you’ve found a way around Davidoff Iwill personally give you a medal’.8 These cases provideguidance on acts or omissions of trade mark proprie-tors which are unlikely to be considered to demonstrateimplied consent to imports to the EEA.

In Quiksilver Pty Ltd and Na Pali SAS v CharlesRobertson (Developments) Ltd (T/A Trago Mills),9 theparallel importer argued that a licensee of the trademark proprietor had given implied consent to sale ofgoods in Europe because it knew that it was supplyinggoods to a financier based in Spain and that thatthe goods would be shipped to the port in Turkeynearest to Europe. This argument was rejected. TheHigh Court held that it might be possible to implyconsent to placing goods on the market within the EEAwhere a manufacturer entered into a sale transactionwith a purchaser ‘which it knows operates only orperhaps even principally within the EEA’ but in anyevent consent could not be implied as extending to the

5 Case C-355/96 Silhouette International v Harlauer [1998] FSR 729; Case173/98 Sebago Inc & Ancienne Maison Dubois et Fils SA v GB-Unic SA[1999] ECR I-4103.

6 Case C-414/99 [2002] RPC 20.

7 Case C-244/00 [2003] ETMR 75.

8 ‘A law unto himself ’, Stephen Moss, The Guardian 24 June 2005.

9 [2004] EWHC 2010 (Ch), [2005] FSR 8.

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party financing the deal who would only take posses-sion of the goods if the buyer defaulted on payment.

Hewlett-Packard Development Company LP andCompaq Trade Mark BV v Expansys UK Limited10 con-cerned the importation from Malaysia and Pakistan byExpansys of personal organisers made by Hewlett-Packard (‘HP’). Expansys relied on evidence including thelanguage of the instruction leaflets supplied with the pro-ducts, the shape of the electrical plugs attached to them,and the alleged oversupply of products to the Malaysianand Pakistan markets as demonstrating HP’s consent tothe imports. None of these facts were considered to showthat the trade mark owners had renounced their rights,particularly in light of evidence from Expansys that theywere aware that HP objected to parallel imports.

Sony Computer Entertainment v Electricbirdland11

concerned the importation of Sony PlayStation Porta-ble (‘PSP’) consoles into the UK. Electricbirdlandargued that it had received orders for its products fromdivisions within the Sony Group of companies,employees, and licensees of the Sony, sometimes payingwith Sony credit cards. These orders had been placedbefore and after the legal action against Electricbird-land. It was held that sales to companies within theSony Group which were not connected to the trademark owners did not support an allegation of generalconsent; nor was there sufficient evidence to supportthe other allegations. No inference could be made,from evidence that small numbers of sales had takenplace, that a general consent had been given.

In Sun Microsystems Inc v Amtec Computer Corpor-ation Ltd,12 Amtec argued that it had purchased theinfringing goods innocently, in the honest belief thatthey were of EU origin. The packaging for the goodswas marked with a UK serial number and their con-tract with the supplier contained a term that the goodswere of EU origin. In fact, the goods had been acquiredby the supplier from a company based in the EU, buthad not originally been placed on the market in theEEA with Sun’s consent. The court held that the lack ofknowledge was not a defence to infringement proceed-ings, nor was it a defence for the trader to show thathe took all reasonable steps open to him to establishthat goods were put on the market by, or with theconsent, of the trade mark proprietor.

In Honda Motor Company Ltd and others v Neesamand others,13 it was argued that implied consent had

been given in relation to a particular consignment ofmotorcycles because the relevant US supplier was openabout its export trade and shipping containers loadedwith bikes for export were regularly delivered to thatsupplier, a fact of which Honda must have been aware.In addition, there was evidence that Honda could havestopped the exports but failed to do so. Lewison J heldthat the knowledge of a sales representative could notamount to consent by Honda, and was not a matterwhich could be delegated to a sales rep visiting localdealers nor could a local dealer believe that the salesrep had such authority. In any event, knowledge doesnot in itself amount to consent, nor could a failure topolice contractual restrictions amount to an unequivo-cal consent to import into the EEA.

In Adidas-Saloman AG v Microhaven Ltd and others,14

it was held that a letter from a representative of the trademark proprietor confirming that samples were genuineand cleared for resale if supported by relevant documen-tation did not constitute consent to resell the goodswithin the EEA, especially as the representative had actedspeedily to retract any consent that might have beengiven before any damage could have been done.

According to Pumfrey J in Levi Strauss & Co andLevi Strauss (UK) Ltd v Tesco Stores Limited andothers,15 the ‘clear thrust’ of the decision of the ECJ inDavidoff was that only express consent to subsequentmarketing within the EEA will suffice.

The possibility of implied consent byproduct markingsNotwithstanding the outcomes of the above cases,prior to the decision in Mastercigars, the Court ofAppeal decisions in Glaxo Group Limited v DowelhurstLtd and Richard Taylor16 and Roche Products Ltd v KentPharmaceuticals Ltd17, each relating to parallel importsof pharmaceuticals, appeared to leave open the possi-bility that a parallel importer might be able to demon-strate implied consent where the products had beenmarked with European regulatory marks.

Glaxo v Dowelhurst concerned the sale by Glaxo ofthree drugs used in the treatment of HIV and anasthma drug to buyers at low prices on the understand-ing that they were for humanitarian use in Africa. Thedrugs were diverted to a Swiss company which sub-

10 [2005] EWHC 1495.

11 [2005] EWHC 2296 (Ch).

12 [2006] EWHC 62.

13 [2006] EWHC 1051.

14 [2003] EWHC 840.

15 [2000] EWHC 1556 (Ch).

16 [2005] ETMR 104.

17 [2006] EWCA Civ 1775.

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sequently sold them to Dowelhurst, which importedthem into the UK and sold them to UK hospitals.

Glaxo sued for trade mark infringement and appliedfor summary judgment against Dowelhurst and itsprincipal shareholder, Richard Taylor. At first instance,Deputy Judge Peter Prescott QC held that there was noevidence which ‘unequivocally’ demonstrated theconsent of Glaxo to the sale of the goods within theEEA. He granted summary judgment in respect of oneconsignment which had been delivered to Africa by aforwarding agent instructed by Glaxo and subsequentlyre-imported into the EEA.

On appeal, Dowelhurst argued that the packaging ofthe drugs destined for Africa was identical to that usedfor the European market and even bore a Europeanproduct licence number (‘EMEA number’). In addition,Dowelhurst had notified Glaxo of its proposal to repack-age and re-label the products for sale within the UK andGlaxo made no objection to the repackaging. Nothing onthe packaging indicated that the drugs were meant forAfrica and must not be sold on the European market.Dowelhurst added that, as Glaxo had sold and deliveredthe goods to purchasers in France, it had placed thegoods on the market for the first time within the EEA; itfollowed that its trade mark rights had been exhausted.

A full trial was therefore necessary, both to establishwhether implied consent had been given and toestablish the facts regarding the sale of the drugs

The Court of Appeal considered it arguable that anEMEA licence number on the packaging of thepharmaceutical products could operate as a sufficientconsent under Article 7 to the placing of those pro-ducts on the market in the EEA, although the argu-ments were not considered in detail. A full trial wastherefore necessary, both to establish whether impliedconsent had been given and to establish the factsregarding the sale of the drugs. The case was settledprior to a full trial so the question was left open.

Roche Products Ltd v Kent Pharmaceuticals Ltd18 con-cerned the parallel importation of part of a batch of18,000 strips for self-testing of blood glucose levelsmanufactured by Roche in the USA. The strips, whichbore the ACCU-CHECK trade mark and other trademarks held by Roche, were ordered by another Rochecompany, PRISA (Roche’s distributor in the Caribbeanand Central American region). PRISA supplied the

batch to PROPAS, a company which was undertaking aclinical trial in vulnerable communities of the Domini-can Republic using the strips, on condition that the teststrips were used exclusively for the clinical trial andwere not resold or transferred to any third party organ-izations or companies.

At least some of the batch of 18,000 strips ended upin France where they were purchased in good faith byKent, which imported them into the UK for resale.

The packaging of the strips contained informationand instructions in three languages, English, Spanish,and Portuguese, which are the languages spoken in theCaribbean and Central and South America. In addition,the packaging bore a CE mark.

Kent argued that the strips had first been put on themarket within the EEA with Roche’s implied consent,which Roche had unequivocally demonstrated byplacing a CE mark, and including three Europeanlanguages on the packaging. Roche argued that a CEmark merely records the fact that the goods compliedwith the requirements of EU regulatory authorities andthat it has nothing to do with the consent of a trademark proprietor to the placing of those goods any-where on the market in the EU.

At first instance, Lewison J held that there was noreasonable prospect that Kent would successfullydefend Roche’s claim for trade mark infringement andgave summary judgment for Roche. Kent appealed.

The Court of Appeal recognized that Kent faced anuphill task in establishing that the presence of a CEmark on the packaging represented consent sufficientfor Article 7 purposes, especially in light of the needfor such consent to be clear and unequivocal as deter-mined by the ECJ in Davidoff. Roche’s associatedcompany, PRISA, had plainly not consented to theplacing of the products on the market in the EU at thetime the products were supplied to PROPAS.

Neuberger LJ accepted that it would in principle bepossible for a parallel importer to establish throughevidence that a statement or mark which would not con-stitute a sufficient consent for the purposes of Article 7as a matter of pure linguistics or legal principle mayoperate as such a consent as a result of the generalunderstanding in the particular market. Under Englishlaw, where an expression has a special meaning by virtueof ‘the custom of the trade’, effect will be given to thecustom of the trade unless it is inconsistent withthe express terms of the contract. In this case, however,Neuberger LJ considered that the fact that the CE markestablishes that the product concerned fulfils all EU

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regulatory requirements could not, as a matter of logic,justify the conclusion that, by affixing such a mark, themanufacturer and trade mark owner has consented tothe goods being placed on the market within the EU.The evidence was that the CE mark has a function inmarkets outside the EU. There are some countriesoutside the EU, including Switzerland and Mexico andcertain countries in South America, where the regulatoryauthorities seek proof that certain products (includingtest strips for blood glucose) have met the standardsrequired for sale in the EU, and accept the CE mark asproviding such proof. In addition, the CE mark isseen by some consumers (including those in Turkey,Romania, and Bulgaria) as a sign of quality, whichmakes the goods more attractive to those consumers.

Kent argued that the first instance decision wasinconsistent with the decision in Glaxo v Dowelhurstand Taylor as an EMEA licence number had to allintents and purposes the same effect as a CE mark.Neuberger LJ stated that he shared Lewison J’s concernsabout the decision and acknowledged that the markshad the same effect. He, however, distinguished thatdecision on the basis that in Glaxo v Dowelhurst thepackaging of products meant for marketing in the EUwas identical to the packaging of products destined formarkets outside the EU. In those circumstances, thecombination of the EMEA mark and the identicalpackaging was sufficient to give rise to an arguable casethat products destined for markets outside the EU werethe subject of an appropriate consent. Additionally, thearguments advanced in Glaxo were different to thoseadvanced by Roche, so the cases could be distinguishedon both the facts and the law.

Implied consent proved: theMastercigars caseMastercigars Direct Limited v Hunters & FrankauLimited and Corporation Habanos SA v MastercigarsDirect Limited and Christopher Kenyon19 concerned theparallel importation for resale of handmade Cubancigars (‘habanos’) into the United Kingdom by Master-cigars Direct Limited (‘MDL’), a company incorporatedby Christopher Kenyon.

Background to the disputeCorporation Habanons SA (‘HSA’), a Cuban company,was granted the exclusive rights to buy, sell, and marketCuban rolled tobacco nationally and internationally by

the Cuban government. It owned various trade marks,including UK and European Community marks, forCuban cigar brands. HSA controlled major aspects ofthe Cuban cigar industry including pricing, advertising,and marketing and all aspects of the packaging andtrade mark use. Hunters & Frankau Limited (‘H&F’)was appointed by HSA as its exclusive distributor ofhabanos in the UK.

HSA did not make direct sales to consumers. Sales ofcigars to consumers in Cuba were made through salesoutlets, none of which were owned or operated byHSA. Sales to consumers overseas were made throughoutlets which were required to purchase habanos forresale from authorized distributors such as H&F.Selected outlets worldwide were licensed by HSA undera franchise arrangement permitting the operator tooperate under the name ‘La Casa del Habano’ (‘Casas’).

Cigars in their original sealed packaging could notbe taken out of Cuba without evidence to Customsthat the purchase was legal. Every sale of habanos inCuba had to be recorded on standard invoices knownas ‘facturas’ supplied by HSA to the Casas. Facturasforms in triplicate, contained spaces for the name,nationality, and passport number of the purchaser. Theoperator of each Casa would complete the factura atthe point of sale, retaining one copy for its records andgiving the others to the purchaser. The facturas containthe statement ‘Note show this voucher at CustomHouse on leaving the country’, written in Spanish,English, French, and German. The customer had toprovide one copy of the factura to Customs when thecigars are taken out of Cuba.

Additionally, HSA set an informal restriction on themaximum value of a purchase which an individualcould make at any one visit to a single outlet. Thislimit was approximately $25,000 for sales at Casas andapproximately $2000 for other outlets.

The dispute concerned 10 consignments of habanosimported into the UK by MDL. At first instance, JudgeFysh found that the cigars had been imported withoutconsent and thus infringed under the Trade Marks Act1994. The Court of Appeal reversed the decision andheld that, on the facts of the case, HSA had indeedgiven implied consent to the placing of the consign-ments on the market on the UK.

Davidoff consideredAccording to Jacob LJ, the use of the word ‘unequivo-cally’ by the ECJ in Davidoff was not concerned with

19 [2007] EWCA Civ 176; [2007] RPC 565.


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requiring the defendant to prove implied consent tothe criminal standard of proof, ie beyond reasonabledoubt, but was merely a reference to whether a particu-lar action of the trade mark holder clearly indicatedconsent. An action which could be interpreted as beingconsistent with consent, but could also be consistentwith a lack of consent, should not be considered by thecourts as unequivocally demonstrating consent. JacobLJ stressed that previous decisions in which the defen-dants had failed to establish consent were decisionswhich turned on their own particular facts. For eachcase, it is necessary to focus on what actually happened,on actual knowledge and the actual, practical controlor right of control by the trade mark owner.

The facts indicating implied consentJacob LJ found that HSA had at least de facto controlover sales through Casas and, despite having exclusivedistributors outside Cuba, not only tolerated but actu-ally allowed foreigners to take small commercial quan-tities of habanos out of Cuba for resale. The judge gaveparticular weight to the following factors:

† the $25,000 limit for sales through Casas, which waswell above that which was reasonable for purely per-sonal consumption. Witness evidence submitted byHSA was that the purpose of the limit was to protectits exclusive distributors, which led to the inferencethat HSA knew and expected that these small quan-tities would be resold in their distributors’ terri-tories. The fact that the limit was probably notobserved in practice did not matter; the key factorwas the existence of the limit;

† the fact that the facturas facilitated the export ofsmall commercial quantities of cigars. Although theoperators of sales outlets in Cuba were not legallyrequired to provide copies of completed facturas toHSA, in practice HSA could obtain copies onrequest. HSA, therefore, had the facility to monitorthe export of cigars by private individuals, but wasunable to demonstrate that it had done so. HSA’sfailure to police exports where a system was in place,in combination with facilitation of exports by theprovision of facturas suggested ‘a positive decision tocondone (i.e. consent to) the parallel trade’;

† meetings between representatives of HSA, Casas,Cuban customs, and government officials whichdemonstrated that the parties were acting in concertconcerning the domestic market, including sales to

foreigners. Meeting minutes demonstrated that theparties had a common concern to make substantialsales through Casas in order to maximize foreign cur-rency entering the country and were aware that largedomestic sales would affect the overseas market. HSAearned a 2% royalty rate on sales through Casas,which would act as an incentive to consent to sales ofcommercial quantities by Casas; and

† evidence that HSA had at least de facto control overthe operation of Casas.

This evidence, considered as a whole, led to the con-clusion that HSA were actually saying to the Casas ‘youcan sell these small but commercial quantities toforeigners and, if you do, you must give them theappropriate documentation so they can go throughCustoms so they can take them home to sell’. In turn,this led to the conclusion that HSA had unequivocallyconsented to the use of the trade marks on the purcha-ser’s home market.

Jacob LJ considered that the implied consent coveredsales in the EEA as much as elsewhere in the world.The nationality of the purchaser was not a relevantconsideration at the point of sale. Particular weight wasplaced on the fact that the facturas contained instruc-tions in German; with the exception of Switzerland, thecourt was not aware of any country outside the EEAwhich was German-speaking, which led to the inferencethat the instructions were for the benefit of German-speaking EEA citizens.

The case was also of interest because of the opinionexpressed by Jacob LJ on the doctrine of EEA-wideexhaustion of rights. He was highly critical of what hetermed this ‘so-called doctrine’, at least as far as trademark rights are concerned, considering it to be ‘self-evidently rather anti-competitive and protectionist’ andobserving that the general public ‘would be surprised’to know the legal position. The court acknowledged,however, that it was obliged to follow the guidance ofthe ECJ in applying the provisions of Article 5 of theTrade Mark Directive, as implemented in the UK.

Honda v Neesam: a furtherdemonstration of implied consentHonda Motor Company Ltd and Honda Motor EuropeLimited v Neesam and others20 heard in early 2008 by theChancery Division of the High Court, concerned salesof Honda motorcycles by the principal wholly ownedAustralian subsidiary of the Honda group (‘Honda

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Australia’) to an Australian company (‘Lime Exports’),whose main business was the export of motorcycles toother motorcycle traders based outside Australia.

The Honda Motor Company Ltd, based in Japan(‘Honda Japan’), was the principal company in theHonda group. In addition to Honda Australia, thegroup had subsidiaries which were responsible for itsbusiness in other regions of the world, including a sub-sidiary based in the UK, Honda Motor Europe Limited(‘Honda Europe’), responsible for aspects of thegroup’s business in Europe. Honda Europe had a sub-division (‘Honda UK’) that was responsible for sales inthe UK. Honda Japan owned various trade marks,including those on Honda motorcycles.

Between 1999 and 2004, Lime Exports suppliedHonda motorcycles to a UK company (‘KJM’) whichwere placed on the market in the UK by KJM. HondaJapan and Honda Europe applied to court for judg-ment that KJM’s parallel imports and resales of Hondamotorcycles infringed its UK trade marks.

Honda Australia’s dealings withthe exporterA major factor in the decision that implied consenthad been granted was the nature of dealings betweenHonda Australia and Lime Exports. Honda Australia,which had an ongoing trading relationship with LimeExports since 1992, was aware that the company wasan exporter of motorcycles on an international scale.By the early 2000s, Lime Exports was one of HondaAustralia’s largest single customers.

In addition, Honda Australia knew that LimeExports would be reselling the motorcycles to tradepurchasers outside Australia, who would resell them inthe course of wholesale or retail business. Sir AndrewPark considered that it followed that the relationshipbetween Honda Australia and Lime Exports was suchthat Honda Australia consented to Lime Exports resell-ing the bikes to business customers outside Australia,unless a specific objection was raised. If Honda Australiahad wished to impose a condition that the bikes shouldnot be resold in particular regions, it was HondaAustralia’s obligation to say so explicitly. Although noexpress consent was given, it was implied. This consentwas equivalent to the consent of Honda Japan, giventhe closeness of the relationship between the twoentities. It also followed that, as a consequence of thetransaction between Honda Australia and LimeExports, Honda Australia also consented to the custo-mers of Lime Exports, including KJM in the UK,reselling the bikes in the course of their own business.

Honda Japan and Honda Europe argued that, even ifan implied consent to resell the bikes outside Australiahad been given, resales to or within the EEA wereexcluded. Sir Andrew Park decided that, although theburden of establishing that consent to resales was givenby the trade mark proprietor (Honda Japan) lay withthe reseller, the burden of proving specific exclusions tothis consent lay with Honda Japan and Honda Europe.The evidence was that Honda Australia had not con-sistently informed Lime Exports of restrictions onresale or asked what was to be done with the bikes. Thenature of the relationship between the parties was suchthat Honda Australia must have known that LimeExports were exporting on a large scale.

Sir Andrew Park did not consider that his decisionconflicted with the opinion of the ECJ in Davidoff forthe following reasons:

† Referring to and adapting the decision in Master-cigars, unequivocal implied consent is established by‘a proved act which is consistent with consent andinconsistent with the absence of consent’. By sellingmotorcycles to Lime Exports without any conditionsas to the identity or location of onward purchasers,Honda Australia gave implied consent to the bikesbeing resold to any purchaser in the world outsideAustralia. On that basis, it was not necessary to con-sider whether consent had been given to resell thegoods specifically within the UK or the EEA; and

† There was ‘far more than silence’ from HondaAustralia. It was inherent in the nature of the trans-action between Honda Australia and a business cus-tomer like Lime Exports that Honda Australia wouldhave an expectation that Lime Exports would resellthe bikes and that permission to do so was granted.

Honda Australia could not prove that Lime Exports wassubject to a long-standing restriction on destinations towhich it could export bikes. The evidence was that LimeExports was told ‘there would be problems’ if motor-cycles were exported to countries where the Hondagroup had an appointed distributor and that, if com-plaints from distributors were received, the supply ofbikes would stop. This was not considered to constitutean explicit prohibition on resale in those territories. Infact, on more than one occasion, it was agreed that bikeswould be supplied for sale wherever Lime Exportswished, on the condition that the sales were low profileand the bikes did not end up back in Australia.

Sir Andrew considered that Honda Australia did notsuccessfully place restrictions on any implied consentto resell the bikes until it adopted a consistent practiceof asking for destination information when negotiating


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contracts with Lime Exports. This practice had theeffect of limiting the implied consent to the regionsnotified by Lime Exports.

Exhaustion of rightsSir Andrew’s comments on exhaustion of trade markrights are also significant. KJM argued that, even ifconsent for exports to the UK was not given, exports toother countries within the European Union were notrestricted. In Sir Andrew’s opinion, had Lime Exportssold the bikes to a trade purchaser within an EEAcountry other than the UK, who had then resold themto KJM for resale in the UK, the rights of Honda Japanas trade mark proprietor would have been exhaustedas, arguably, the initial placing of the bikes on themarket within the EEA was with Honda Japan’sconsent. A prohibition on exports to the UK couldthus potentially be circumvented.

Prudent steps for trade markproprietorsAlthough the implied consent of the trade mark pro-prietor to parallel imports was found to have beengiven based on the particular facts of the Mastercigarsand Honda decisions, it is likely to remain extremelydifficult for parallel importers to demonstrate suchconsent ‘unequivocally’. The question of what amountsto consent will be considered on the particular facts ofeach case. Although such consent cannot be implied bysilence, it may be implied by actions, particularly overa prolonged period of trading.

In each decision, the perceived failure to ask questionsabout the ultimate destination of the goods was regardedas highly significant in demonstrating consent. It is notclear, however, at what point the failure to police theactivities of distributors becomes actual facilitation ofimports into the EEA, as was the case in Mastercigars. Itmay be that the limit lies where a system is set up by thetrade mark holder which could be used to policeimports but which is not used for that purpose.

The Court of Appeal’s guidance on whether theactions of the trade mark proprietor may be consideredto demonstrate ‘unequivocal’ consent is that the

actions must be ‘consistent with consent and inconsist-ent with a lack of consent’. It remains unclear how thecourts will apply this guidance in practice.

The practical effect of these decisions for trade markproprietors is that the risk of being considered to havegranted implied consent to imports to the EEA is real,particularly if consumers can buy commercial quan-tities of goods outside the EEA. It is therefore advisableto make any import restrictions clear, whether oninvoices, packaging or the goods themselves, and tomonitor the activities of distributors in order to mini-mize this risk. Additionally, in order to avoid inadver-tent exhaustion of trade mark rights within the EEA, itwould be advisable for sales agreements to state thatresales are limited to specific territories rather thanbeing unlimited ‘with the exception of ’ a specific terri-tory. As Honda demonstrates, an implied consent toresales anywhere in the world may be considered toinclude resales within the EEA.

Implied consent by subsidiaries may be deemed tobind a parent trade mark proprietor. Subsidiariesshould be made aware of restrictions on resale and therisk that consent for parallel imports may be impliedby their dealings with known trade exporters. Follow-ing Honda, this risk of implied consent does notappear to arise for distributors. Motorcycles had alsobeen supplied to the UK by a distributor of HondaJapan rather than a subsidiary and the judge held thatimplied consent given by the distributor would notbind Honda Japan as the relationship between the twoentities would be on a different footing.

If there is a concern that implied consent has alreadybeen given, it may be withdrawn by adopting a practiceof asking for information about the ultimate destina-tion of the goods. A court would be likely to considerany implied consent for resales to be limited to thoseterritories notified by the reseller. Any such notificationalso provides the trade mark proprietor with an oppor-tunity to revoke consent. The adoption of simpleadministrative steps such as these should help reducethe risk for the trade mark proprietor of implyingconsent to placing trade marked goods on a widermarket going forward.

doi:10.1093/jiplp/jpn149Advance Access Publication 8 September 2008


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Parallel imports: consent by conduct