Selling goods sourced from another country? Double check before you go into business!

There are a number of businesses who source products from another country and sell those products within Australia. The idea is to buy these products cheap and sell them at a higher rate in Australia. It is also common for these businesses to sell their products through websites such as eBay, or sometimes through retail outlets. If you operate such a business, you should always do your due diligence and ensure that the products are not counterfeit products, products which look similar or identical to existing products, or products that feature trade marks which are identical or similar to trade marks which are registered in Australia. You should also make enquiries in relation to your source and ensure that they are a legitimate business and authorised to sell the products you intend to sell in Australia.

Why do you need to do these due diligence searches? This is because intellectual property laws may differ between countries and what may be permitted in the country where you sourced the goods may not necessarily be permitted in Australia. The source country may also be lax in policing their intellectual property laws and you may be unwittingly purchasing – and selling – counterfeit products.

If you do not do your due diligence, you may be subject to legal action from the real owners of the products. They may demand from you that you surrender your stock as well as any profits that you have made through the sale of these products. They may also seek other damages, depending on the extent on the breach.

The above happened to a client of ours, however fortunately the matter was resolved without proceeding to court. The case of Facton Ltd & Ors v Dawood (No.2) [2011] FMCA 933 also is a cautionary tale in relation to these matters. In this case G-Star brought legal proceedings against Mr Dawood, alleging that Mr Dawood sold counterfeit G-Star products. Mr Dawood initially admitted that he had purchased 15 products and sold those products in his store; at court he gave evidence that his sales assistant purchased those products from an unidentified person who had purchased the products while that person was abroad. Mr Dawood also claimed, in a letter, that he did not know that selling “copy brands” was illegal as they were “accessable (in) any market and in many stores”.

As previously mentioned these matters can be serious. In the above case Mr Dawood was ordered to pay to G-Star a total of $63,000, including the cost of their lawyers – over the sale of a relatively small number of products!

At the end of the day, if you are in business and you source your products from overseas, do your due diligence and make sure that you are operating within the law.