Small businesses reselling after-market products and other items could face legal action unless they make it clear they are not the official manufacturers of the products they are selling, a legal expert has warned.
The warning come after the Federal Court recently ruled a company reselling rooms at an apartment building had infringed the trademark of the building’s official agency, as some customers may have been under the impression the reseller was actually the official management.
Trevor Choy of Choy Lawyers says the case shows how resellers must be “extremely careful”, and warns they are “open to legal action” if they do not show customers they are not the official manufacturer or seller.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
The case before the Federal Court concerned the Circle on Cavill apartment building on the Gold Coast. While officially managed by the Mantra Group, a number of resellers sold rooms for the building – including Tailly Pty Ltd.
While Tailly was legally reselling the rooms, it also registered a number of domain names using the “Circle on Cavill” name, such as circleoncavillapartments.com.au.
Problems arose when customers who had used Tailly’s sites reached the Circle on Cavill building with their booking forms in hand, but the Mantra Group had no record of their booking due to a communications mishap.
Choy says this resulted in an “irate customer and a frustrated receptionist”, with the customer believing they had certain rights as they had booked through an official agency.
As a result, Mantra sued Tailly for trademark infringement saying customers were convinced they were dealing with the official company, and not a reseller.
This point was even backed up by the fact Tailly’s sites were gaining higher Google rankings than Mantra Group’s official rental site.
Tailly was ordered to pay all of its profits gained from the bookings to Mantra.
But Choy says the real ramifications of the case are for any company reselling products made by another manufacturer. He warns the Federal Court has ruled businesses can now go too far with their representation of the relationship to the manufacturer or official seller.
“Obviously rental agencies will be hit because of this, but also any reseller. It’s commonly accepted that if I am reselling a product, then nobody can stop me as long as I am using the name correctly and being legitimate. But the court has now said there is a limit in your representation of your relationship to the supplier, and that can infringe a trademark.”
Choy uses the example of a business selling iPod accessories. “If I set up a website, such as ipodaccessories.com.au and I do not make it absolutely crystal clear I am separate from Apple, the company can use this case to come after me.”
Choy also says a number of sectors will be affected because of this ruling, including the huge market of resellers for after-market automotive parts.
“You have a whole heap of businesses using reselling on eBay, many have their own websites. And these businesses now have to be way more careful than they used to be.”
“There’s a particular brand in American known as the Gerber knife, a very well known brand, but also lots of resellers and the official site is actually buried in some Google results by resellers. If this situation was in Australia, the business could actually use this case to shut down those sites.”