## Facts

- A corporate group owned famous “FRED PERRY” word and laurel device trademarks worldwide; a Japanese subsidiary held the Japanese trademark rights.
- The trademark owner/licensor granted a Singapore company a license to produce and sell trademarked goods only within specified territories and prohibited subcontracting.
- The Singapore licensee nonetheless subcontracted manufacturing to a factory in China, outside the licensed territory and without the licensor’s consent.
- A Japanese importer bought the goods from the Singapore licensee and imported and sold them in Japan.
- The Japanese trademark owner placed a newspaper advertisement warning the trade that the imported goods were infringing.
- The importer sued the trademark owner and the newspaper entities for damages, alleging harm to business reputation; the trademark owner counterclaimed for trademark infringement.
- The Osaka High Court held the importation infringed the Japanese trademark right and rejected a parallel-import defense; the importer filed a final appeal.

## Issues

1. Under what conditions are parallel imports of trademarked goods non-infringing under Japanese trademark law?
2. Whether goods manufactured through unauthorized subcontracting and outside the licensed territory can qualify as “genuine” goods for purposes of a parallel-import defense.
3. Whether importing such goods into Japan infringes the Japanese trademark owner’s rights.

## Decision

- The Supreme Court (First Petit Bench) dismissed the importer’s final appeal and affirmed the finding of trademark infringement.
- The Court articulated a three-part standard under which parallel imports may be treated as non-infringing “genuine” goods.
- Applying that standard, the Court held the imports at issue were not protected because production occurred through prohibited subcontracting and outside the licensed territory, defeating the conditions for lawful parallel importation.

## Legal Principles

- Parallel importation does not infringe a Japanese trademark right only if all conditions are satisfied:
  - The trademark on the goods was affixed by the foreign trademark owner or a rightful foreign licensee (genuineness).
  - The foreign trademark owner and the Japanese trademark owner are the same entity, or so legally/economically connected that the mark indicates the same source in both markets (identity of source).
  - The Japanese trademark owner can directly or indirectly control quality so there is substantially no quality difference between the imported goods and goods marketed under the mark in Japan (quality control/substantial identity).
- The permissibility of parallel imports turns on whether trademark functions—source indication, quality assurance, and protection of owner reputation and consumer interests—are preserved.
- Contractual breaches that undermine the trademark owner’s ability to control manufacturing conditions and quality (e.g., unauthorized subcontracting and out-of-territory production) may prevent goods from being treated as “genuine” for parallel-import purposes.

## Conclusion

The Supreme Court upheld liability for trademark infringement and established that parallel imports are lawful only when the goods are genuinely authorized, indicate the same source as the Japanese mark, and remain subject to effective quality control; unauthorized subcontracting and unapproved production locations defeated those requirements here.


Hit Union KK v. Importer, 57 Minshu 125 (Sup. Ct. Japan 2003)