Know your Competition

MANY people recognise the Gold Coast as an idyllic location to relocate for semi-retirement or an improved lifestyle.

Relocation can involve commercialisation of a new business concept or the purchase of an existing business.

If you are starting a new business, buying an existing one or currently operate or own a business, it's important to identify and consider existing and future competitors. In retail services, competitors may include:

• Licensed distributors of goods;

• Parallel importers;

• Internet traders via private websites and Ebay stores;

• Those who deal illegally in counterfeit goods.

Parallel importation (PI) is the importation of legitimately trade-marked goods by a trader - not a licensed distributor of those goods. PI is a business model practised by traders in Australia, including ALDI.

There are two main benefits of trading under a PI business method. First, an importer is typically able to obtain goods at a landed cost cheaper than domestically sourced goods. This can be because of favourable international currency exchange rates and the availability of cheaper goods overseas. The importer doesn't usually have to spend a lot to promote the goods domestically as they often have an established reputation.

The importer is therefore taking advantage of the international goodwill and reputation of the goods, which has cost the trade mark owner to develop.

The law

In Australia, the doctrine of exhaustion provides that the trade mark owner's exclusive right is exhausted by the act of first placing the goods on the market. This means the trade mark owner has no control over subsequent dealings in those goods.

PI therefore is permitted and can't be prevented by an affected party. However, there are various strategies an affected party can employ to ensure they're not being financially disadvantaged due to a competitor's illegal conduct.

Trade mark infringement

In the event a competitor uses a trade mark without the consent of the owner, a trade mark infringement occurs.

Passing off

Passing off is a common-law action available to business owners whereby a competitor misrepresents an association or affiliation it doesn't have with the business owner - and consequently, the business owner suffers damage.

Passing off usually goes hand-in-hand with misleading and deceptive conduct actions under the Trade Practices Act.

Counterfeit goods

If a trade mark owner (or its licensee) believes the imported goods are counterfeit, either party can lodge a Notice with the Customs CEO. This empowers the CEO to seize goods he believes may be counterfeit. It is at this stage a business owner is notified of the good's intended recipient.

The business owner can then contact the intended recipient to require they disclose the source of the counterfeit goods. Alternately, the business owner has 10 business days to bring an action against the importer for trade mark infringement.

Tracking

A trade mark owner may use tracking mechanisms such as holograms, serial numbers or computer chips to identify goods.

Tracking devices are useful in ascertaining the authenticity and origin of the goods and can be crucial in assessing breaches of any licence and/or distribution agreement. Such a breach can trigger termination of a distributorship.

Summary

Business owners should monitor their competitors to ensure their rights are not being infringing upon. Enforcement via trade mark infringement, misleading and deceptive conduct, passing off actions and Customs Seizure Notices can help business owners protect their business and intellectual property interests.