Court: Osaka High Court, Eighth Division
Case number: 2017 (Ne) 245
Date: September 21, 2017

The Osaka High Court ruled that the parallel import of goods bearing a trademark similar to a Japanese registered trademark was not substantially illegal.  The details are as follows.

Facts

The appellant imported carpeting from ZOLLANVARI Company (hereinafter referred to as "ZOLLANVARI") as an exclusive agency in Japan and distributed the carpeting in Japan.  The appellant made an exclusive agency agreement with ZOLANVARI, which is located in Islamic Republic of Iran and provides handwoven carpets around the world.  ZOLLANVARI uses the "ZOLLANVARI" mark, which is the same as the following appellant’s mark, and "ZOLLANVARI" mark is well known in Japan as ZOLLANVARI’s mark.

The appellant registered the trademark (hereinafter referred to as "Appellant’s Mark") in Japan.  Under the examination at the Japan Patent Office, the Appellant’s Mark was provisionally rejected because this mark was identical to the well-known "ZOLLANVARI" mark.  In order to overcome the office action, the appellant submitted a written certificate wherein ZOLLANVARI stated that the appellant was their exclusive agency in Japan and was authorized to register the "ZOLLANVARI" mark in Japan.

Appellant’s Mark:   
Registration Number:5385564
Class: 27
Designated Goods: Carpeting; Non-textile wall hangings; etc.

On the other hand, the appellee imports carpets, furniture and upholstery and sells them via the Internet.  The following mark (hereinafter referred to as "Appellee’s Mark") is attached to some of their products.

The Appellant’s Mark and the Appellee’s Mark are considered to be similar.

Issue

The points at issue are as follows.

(i) Who labeled the Appellee’s Mark on the appellee’s goods, the appellee or ZOLLANVARI?

(ii) Whether the import of the appellee’s goods is substantially illegal?

The Judgment of the Osaka High Court

(Issue (i))
The court found that ZOLLANVARI labeled the Appellee’s Mark on the appellee’s goods and sold such goods to the appellee on the premise of selling goods in Japan.

(Issue (ii))
The import of the goods bearing the Appellee’s Mark is not substantially illegal due to the following reasons.

- ZOLLANVARI does not have a trademark right for the mark "ZOLLANVARI" in IRAN.  However, ZOLLANVARI is substantially a trademark right holder in IRAN because ZOLLANVARI owns outlet stores around the world.  In addition, the Appellant’s Mark was allowed to be registered based on the authorization from ZOLLANVARI.

- The labels with the Appellee’s Mark were attached to the appellee’s goods by ZOLLANVARI, which was substantially the trademark holder in IRAN, and, therefore, the Appellee’s Mark does not harm the function of the source identifier of the Appellant’s Mark.

- ZOLLANVARI ordinarily controls the quality of the Appellant’s Goods.  ZOLLANVARI also controls the quality of the Appellee’s Goods with the knowledge that such goods are sold in Japan.  Therefore, the quality of the appellant’s goods and the appellee’s goods are substantially the same.

Comments

The famous Fred Perry case, which was ruled by the Supreme Court on February 27, 2003, provides the criteria to judge whether the so-called "parallel import" is legal.  The Japanese Courts seem to have adopted the strict criteria. That is to say, "parallel import" has been considered legal, provided all of the following conditions are met.

(i) A trademark is legally attached to imported goods by a foreign trademark owner or its licensee;

(ii) The trademark owner in the foreign country is the same as the Japanese trademark owner, or he/she has a relationship with the Japanese trademark owner, such as both being legally or economically recognized as the same entity, so that the trademark can indicate an identical source to the one indicated by the Japanese trademark; and

(iii) The Japanese trademark owner can directly or indirectly control the quality of the products, so that there is substantially no difference in the quality between the imported products and the products of the Japanese trademark owner.

Applying the above criteria to the subject case, it is clear that ZOLLANVARI is not a foreign trademark owner or its licensee.  In addition, the court did not judge whether ZOLLANVARI can be equated with the Japanese trademark owner, i.e., the appellant, in view of legal or economical relationship.  Furthermore, the Japanese trademark owner does not directly or indirectly control the quality of imported goods.  Therefore, the subject case does not meet the criteria indicated by the Supreme Court.  The High Court lowered the criteria seemingly on the grounds of the facts that the "ZOLLANVARI" mark is well known in Japan and that the Appellant’s Mark was allowed to be registered based on the authorization by ZOLLANVARI.  However, the judgement of the subject case seems to lower the criteria too much.  It is necessary to watch whether the criteria regarding the parallel import case will be loosely interpreted hereafter.