By the end of 2024, an incident in Australia involving the resale of cookies from a well-known U.S.-based trademark holder, “Crumbl Cookies”, raised significant questions about international trade regulations and trademark infringement.

The Incident

An Australian entity imported cookies manufactured and marketed by Crumbl Cookies in the U.S. without a formal trade agreement. These cookies, celebrated for their unique textures and flavors, gained worldwide recognition, attracting food enthusiasts globally. The Australian entity purchased these cookies directly from U.S. stores as regular customers, imported them to Australia, and marketed them through independent social media campaigns using the name Crumbl and its trademarks, selling them in a pop-up store in Sydney, at over three times their price in the U.S.

It is worth noting that Crumbl does not have a presence in Australia, but has its famous chef logo registered in Australia, as well as another with its chef logo coupled with the expression Crumbl Cookies.

This activity sparked a legal debate. While campaign organizers argued that their actions constituted parallel importation rather than trademark infringement, others questioned whether such 2 practices undermined the exclusive rights of the trademark holder.

Legal Framework and Analysis

To evaluate the lawfulness of these actions, it is essential to consider the relevant treaties and conventions governing trademarks and intellectual property.

The Paris Convention for the Protection of Industrial Property

Adopted in 1883 and subsequently amended, the Paris Convention protects industrial property, including trademarks. Under Article 6bis:

1. Member countries must refuse or cancel the registration and use of trademarks that imitate well-known marks, especially when confusion is likely.
2. Well-known marks receive protection even if unregistered in a given country, provided the mark is recognized as well-known there.
3. Time limits apply for seeking cancellation or prohibition unless bad faith is involved.

This provision ensures that well-known trademarks like Crumbl Cookies are protected internationally, preventing misuse or confusion.

The Madrid Agreement and Protocol

The Madrid System simplifies international trademark registration through a centralized process. Under Article4 :

1. International registration provides protection equivalent to direct registration in member countries, unless specifically refused within a prescribed timeframe.
2. Priority rights and uniform protection standards apply across member states.

This mechanism enables trademark holders to secure their marks across multiple jurisdictions efficiently, strengthening their legal position.

TRIPS Agreement

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), signed in 1994, establishes comprehensive standards for intellectual property protection. Article 16 provides that:

1. Trademark owners can prevent unauthorized use of identical or similar signs for related goods or services, especially where confusion is likely.

2. Special protections apply to well-known marks, even if unregistered, to prevent reputation damage or consumer confusion.

This agreement underscores the exclusive rights of trademark holders and highlights the importance of preventing unauthorized use.

The Exhaustion Principle and Parallel Import

The exhaustion principle dictates that intellectual property rights are “exhausted” after the first sale of a product. This principle varies:

1. National Exhaustion: Resale rights are limited within the country of sale.
2. Regional Exhaustion: Rights are exhausted within a specific region, such as the European Union.
3. International Exhaustion: Rights are exhausted globally, permitting parallel imports once the product is lawfully sold.

Countries that recognize international exhaustion allow parallel import. However, this creates a legal grey area, as the permissibility of such imports depends on the importing country’s laws. In Australia, parallel imports are generally permissible, but the ethicality of these actions can still be debated.

Ethical and Legal Considerations

Even if the actions of the Australian entity do not constitute trademark infringement under international exhaustion principles, they raise ethical concerns. Trademark holders invest heavily in building their brand reputation and ensuring product quality. Unauthorized resale may undermine these efforts, leading to potential reputational damage and consumer confusion. This is also affected by the fact that the imported cookies were definitely no longer as fresh as when they were sold, especially that they were not imported under proper trade conditions, and the fact that they were sold at over three times their original price. This renders the consumer’s experience with the famous cookies in Australia not in line with the actual experience at the stores in the U.S., indirectly affecting and harming the brand.

Recommendations

1. For Trademark Holders:

• Register trademarks with international authorities under the Madrid System to ensure robust protection.
• Monitor markets for unauthorized imports and take legal action where necessary.
• Educate consumers and partners about the risks of parallel import.

2. For Parallel Importers:

• Conduct thorough legal due diligence to ensure compliance with local laws.
• Avoid marketing practices that might mislead consumers or tarnish the brand’s reputation.

Conclusion

The Crumbl Cookies case highlights the complexities of balancing trademark rights, international trade regulations, and ethical considerations. While parallel import may be legally permissible in some jurisdictions, it remains essential for all parties to navigate these issues carefully, respecting the spirit of intellectual property laws and fostering fair trade practices.

This article has been prepared by:
Cesar Ghaleb – Founding Partner, Dubai
Ahmad Rima – Associate, Dubai/Beirut