Aftermarket parts sellers regularly need to refer to vehicle brands so customers know which models their products are designed to fit. The difficulty is that there can be a fine line between using a brand simply to describe compatibility and using it in a way that suggests the product is genuine, authorised or commercially connected with the vehicle manufacturer. That distinction was central to the Federal Court’s decision in Toyota Jidosha Kabushiki Kaisha v OZI4x4 Pty Ltd (No 3) [2026] FCA 1215.
The dispute arose from OZI4X4’s sale and promotion of aftermarket four-wheel drive accessories, including products bearing Toyota’s HILUX and LAND CRUISER trade marks. Toyota alleged trade mark infringement, misleading or deceptive conduct, passing off and breach of an earlier settlement agreement between the parties.
What makes the decision particularly interesting is the Court’s treatment of two different supply arrangements. Counterfeit HILUX tail lights were imported by OZI4X4 into Australia and held for resale, while LAND CRUISER armrests were drop shipped directly from an overseas supplier to Australian customers. The Court found trade mark infringement in relation to the tail lights, but not the drop-shipped armrests, because of the point at which the goods ceased to be “in the course of trade”.
That did not leave the drop-shipped products outside the reach of the law. The same conduct still gave rise to liability under the Australian Consumer Law and passing off. The Court also found breaches of the parties’ earlier settlement agreement and imposed substantial compensatory, additional and exemplary damages.
The decision is therefore useful not only for counterfeit goods disputes, but also for businesses selling aftermarket and compatible products online. It shows how trade mark infringement, consumer law and passing off can produce different results from the same conduct, and why the wording and structure of online sales arrangements can matter.
Background of the dispute
Toyota Jidosha Kabushiki Kaisha, referred to in the judgment as Toyota Japan, owned a number of Australian registered trade marks, including TOYOTA, HILUX, LAND CRUISER, PRADO, KLUGER and HIACE. Toyota Motor Corporation Australia Limited was an authorised user of those marks.
OZI4X4 operated a business selling aftermarket four-wheel drive accessories through its website and physical premises in New South Wales. Mr Safi was its sole director.
Toyota alleged that OZI4X4 had imported, advertised, offered for sale and sold goods by reference to Toyota’s name and trade marks. Its claims included trade mark infringement under the Trade Marks Act 1995 (Cth), misleading or deceptive conduct and false representations under the Australian Consumer Law, passing off, and breach of an earlier settlement agreement. 2026FCA1215
The conduct fell into three broad categories. The first involved armrests bearing the LAND CRUISER mark. The second involved tail lights bearing the HILUX mark. The third involved online advertising for aftermarket products such as bull bars, headlights, mufflers, sensor mounts and bash plates that referred to Toyota trade marks.
The evidence included a series of trap purchases. Toyota’s investigators purchased armrests and tail lights through the OZI4X4 website and from its physical premises. The products were not manufactured or authorised by Toyota.
There was also evidence suggesting that the sales records produced by OZI4X4 were incomplete. The Court was satisfied that more infringing products were likely to have been sold than could be established from the available records. Importantly, sales of the LAND CRUISER armrests continued after Toyota sent a letter of demand in October 2022, despite a subsequent statement from OZI4X4’s solicitors that sales had ceased.
The earlier dispute and settlement agreement
This was not the first dispute between the parties.
Toyota had commenced earlier proceedings concerning the sale of items including bash plates, snorkels and grilles bearing Toyota trade marks. Those proceedings were settled under an agreement dated 1 October 2021.
Under the settlement, OZI4X4 and Mr Safi agreed, among other things, to cease selling or supplying vehicle parts and accessories bearing Toyota trade marks. They also agreed not to promote or sell aftermarket products by reference to Toyota’s marks unless the use was in good faith to indicate the intended purpose of the goods and the relevant trade mark was preceded by the words “suitable for” or “compatible with” in text of the same size and prominence.
The respondents also agreed to pay Toyota $145,000 by instalments. The agreement expressly contemplated that if further unlawful conduct occurred, Toyota could rely upon the earlier conduct when seeking additional or exemplary damages in later proceedings.
That history became particularly important when the Court considered both breach of contract and the need for deterrent damages.
Trade mark infringement and the meaning of “in the course of trade”
Section 120(1) of the Trade Marks Act requires use of a substantially identical or deceptively similar sign “as a trade mark”. In practical terms, the sign must be functioning as a badge of origin in relation to goods or services.
A central issue in this case was when such use occurs “in the course of trade”.
The distinction was straightforward for the HILUX tail lights. OZI4X4 had obtained the tail lights from a supplier in China, imported them into Australia, held them as stock and subsequently sold them. The word HILUX appeared on the goods and objectively operated as an indication of origin.
The Court therefore found that OZI4X4 had infringed Toyota’s HILUX registration. Importing goods bearing the mark for subsequent retail sale, and then selling them from stock in Australia, was trade mark use in the course of trade.
The LAND CRUISER armrests presented a more difficult issue.
Why were the drop-shipped armrests different?
The armrests were not imported into OZI4X4’s own stock. When an Australian customer placed an order on the OZI4X4 website, OZI4X4 placed an order with an overseas supplier, which then sent the goods directly to the customer.
In other words, OZI4X4 never physically possessed the armrests.
Toyota argued that arranging for goods bearing its LAND CRUISER mark to be imported into Australia still constituted infringing use. The Court examined a number of authorities dealing with importation, including Pioneer, Sony, Playboy Enterprises and, importantly, the Full Court’s recent decision in Fanatics, LLC v FanFirm Pty Ltd.
The Court treated Fanatics as establishing an important distinction. Once goods have been bought for consumption and are no longer on the market, they cease to be in the course of trade. In an online transaction, a mark that becomes apparent only after the goods have reached the purchaser may therefore be encountered after the relevant course of trade has ended.
That reasoning applied to the LAND CRUISER armrests. The mark became apparent when the goods were delivered to the customers. By then, the Court held, the course of trade had concluded. The armrests had not been imported into Australia for any subsequent display, resale or other commercial exploitation involving the LAND CRUISER mark. They were being imported to complete an already concluded retail purchase.
The Court therefore rejected Toyota’s trade mark infringement claim relating to the drop-shipped armrests.
This is one of the more significant aspects of the decision. Australian trade mark legislation does not simply deem every importation of marked goods to be an infringement. The question remains whether the alleged infringer has used the sign as a trade mark in relation to goods while they remain in the course of trade.
The Court acknowledged that this can produce different outcomes depending on the structure of the transaction. A retailer importing counterfeit goods into its own inventory for resale may infringe, while a retailer arranging a direct shipment to a consumer may fall outside section 120 on the particular facts. Wheelahan J did not regard that difference as absurd. It followed from the statutory requirement to identify the particular infringing use and determine whether it occurred while the goods remained in the course of trade.
Importantly, the decision should not be read as establishing a general immunity for drop shipping. As the remainder of the judgment demonstrates, other causes of action may still apply.
Use of Toyota marks in online advertising
Toyota also challenged a series of OZI4X4 website and social media advertisements for aftermarket products.
The Court did not treat every reference to a Toyota vehicle as trade mark use.
Some advertisements clearly communicated compatibility. For example, references to products that “suit” particular Toyota models, when read in their overall context, conveyed that the goods were aftermarket accessories intended to fit Toyota vehicles. In those instances, words such as TOYOTA, HIACE or LAND CRUISER were not being used as badges of origin.
Other advertisements were different. The Court found that TOYOTA and HILUX had been used in a manner that functioned as trade marks rather than simply identifying the vehicles for which the aftermarket products were intended.
The distinction depended on context. Wheelahan J expressly rejected the proposition that particular words must always be used to avoid trade mark use. Whether a sign functions as a trade mark remains an objective question of fact.
The decision is therefore more nuanced than a rule that every aftermarket seller must use a specific phrase. Wording such as “suitable for”, “compatible with” or “suits” may assist in communicating that a product is merely compatible with another trader’s goods, but the whole presentation still matters.
The Court also rejected any suggestion that Toyota needed to prove that particular consumers had actually viewed the infringing web pages. OZI4X4’s website and social media pages were directed to Australian consumers and offered goods for sale using the marks. Uploading and maintaining those pages was capable of amounting to trade mark use in the Australian market. 2026FCA1215
Australian Consumer Law claims
The Australian Consumer Law produced a broader result than the trade mark claim.
The Court emphasised that the concept of conduct “in trade or commerce” under the ACL is broader than the requirement for trade mark use “in the course of trade” under the Trade Marks Act.
That distinction was particularly important for the drop-shipped LAND CRUISER armrests.
Although the Court had found no trade mark infringement in relation to those goods, their sale and delivery remained commercial conduct capable of misleading consumers.
The Court found that reasonable consumers could understand the Toyota marks appearing on the counterfeit products as indicating that they were genuine Toyota products, had Toyota’s sponsorship or approval, had been manufactured to Toyota-approved standards, or were sold by an authorised Toyota seller. Those representations were false.
OZI4X4 therefore contravened section 18 and sections 29(1)(a), 29(1)(g), 29(1)(h) and 33 of the ACL.
The advertising claims largely followed the Court’s contextual analysis under trade mark law. The advertisements that clearly communicated that the goods were aftermarket products suitable for particular Toyota vehicles were not found misleading. The remaining advertisements were found capable of conveying the false representations alleged by Toyota.
The outcome demonstrates why trade mark infringement and misleading or deceptive conduct must be considered separately. Conduct can fall outside section 120 of the Trade Marks Act while still misleading consumers as to origin, approval or commercial association.
Passing off
Toyota also succeeded in passing off in relation to the sale of the counterfeit products.
The Court accepted that Toyota had a large and valuable reputation in its trade marks in Australia. Sales of counterfeit products to members of the public misrepresented their commercial source and caused damage to Toyota’s goodwill.
There were, however, two important qualifications.
First, the trap purchases themselves did not cause the investigators to believe that the goods were genuine Toyota products, so those particular transactions did not themselves injure Toyota’s goodwill.
Secondly, although some of the online advertisements were misleading, Toyota had not established actual damage resulting from those advertisements. There was no evidence that the advertised aftermarket products had actually been sold, and Toyota did not claim reputational damage arising merely from the advertisements. The completed tort of passing off was therefore established in relation to sales of counterfeit products, but not the advertising alone.
Personal liability of the director
Toyota sought to make Mr Safi personally liable in several different ways.
For trade mark infringement and passing off, it argued that he was a joint tortfeasor with the company. The Court did not accept that argument.
Mr Safi was the sole director, had substantial control over the business and had some personal involvement in its operations. He also knew about Toyota’s previous enforcement action and the settlement agreement. Even so, the evidence did not establish sufficiently close personal involvement in the particular acts of infringement to make those acts his own.
The Court therefore declined to impose joint tortfeasor liability upon him for the company’s trade mark infringement or passing off.
His position under the ACL was different.
Accessorial liability under the ACL depends on statutory involvement in the contravention and does not require the same degree of personal participation required to establish liability as a joint tortfeasor.
After Toyota’s letter of demand dated 27 October 2022, Mr Safi had actual knowledge that the armrests bore the LAND CRUISER mark and had the capacity to stop further sales. Further sales nevertheless occurred.
The Court also found him knowingly concerned in the contravening online advertising. His knowledge of the earlier dispute, his ability to control the website and social media content, and the evidence concerning his attitude towards Toyota’s enforcement efforts supported the conclusion that he was at least recklessly indifferent to the relevant advertising. He was therefore liable as an accessory under the ACL for the relevant armrest sales after receiving the letter of demand and for the contravening advertisements.
Breach of the settlement agreement
The earlier settlement created another source of liability.
The agreement imposed obligations that were, in some respects, more specific than the underlying requirements of trade mark law. In particular, it required certain references to Toyota marks to be preceded by “suitable for” or “compatible with” in equally prominent text.
As a result, some advertisements that did not amount to trade mark infringement could nevertheless breach the settlement agreement.
The Court found that OZI4X4 breached the agreement by supplying the counterfeit products and through its advertising. In two instances, the use of “suits” instead of the exact wording specified by the agreement was characterised as a technical breach.
The agreement also bound OZI4X4 and Mr Safi jointly and severally. The Court held that the joint obligation meant Mr Safi could be liable for its breach even where he had not personally committed the underlying act.
This aspect of the judgment is a useful reminder that settlement agreements can have continuing significance well beyond the original dispute. Carefully drafted contractual restrictions may impose obligations that are more precise, and sometimes broader, than the statutory rights that gave rise to the litigation.
Damages and deterrence
Toyota did not pursue lost sales because the available records did not permit the extent of the infringing sales to be reliably calculated. Instead, it claimed damage to reputation and goodwill.
For the HILUX trade mark infringement, the Court awarded $10,000 in compensatory damages for reputational harm caused by the counterfeit tail lights. A further $340 in nominal damages was awarded for the infringing online advertisements.
The more substantial award was additional damages.
The Court considered deterrence particularly important. The conduct had occurred after an earlier dispute, a $145,000 settlement and contractual undertakings designed to prevent repetition. The Court also considered the inadequacy of OZI4X4’s business records, the continuation of related commercial activities through another company associated with Mr Safi and the need to ensure that infringement was not simply treated as a cost of doing business.
Toyota sought $300,000 in additional damages. The Court considered that amount excessive and awarded $100,000.
For the ACL contraventions, OZI4X4 was ordered to pay $16,000 in damages. Mr Safi’s concurrent liability as an accessory was assessed at $4,000.
Passing off attracted $16,000 in compensatory damages. The Court also awarded $100,000 in exemplary damages because ordinary compensation was insufficient to condemn and deter the conduct. Of that amount, $50,000 operated concurrently with the additional damages awarded for trade mark infringement.
Damages for breach of the settlement agreement were assessed at $16,380 against OZI4X4 and Mr Safi jointly, again with substantial concurrency to avoid double recovery for the same underlying harm.
After accounting for the overlapping awards, judgment was entered against OZI4X4 for $166,380 before interest and against Mr Safi for $16,380. The Court added $4,800 in pre-judgment interest, producing final judgment sums of $171,180 and $21,180 respectively.
Injunction and costs
Toyota did not seek an injunction against OZI4X4 because the company was in liquidation.
The Court also declined to grant a trade mark infringement injunction against Mr Safi. Having found that he was not a joint tortfeasor, the Court considered the proposed order too broad.
It did, however, grant a permanent injunction under section 232 of the ACL. Mr Safi was restrained from being involved in false representations that products sold by a business associated with him were Toyota products, were sponsored or approved by Toyota, that the business was affiliated with Toyota, or that the products had been manufactured to Toyota-authorised standards.
The Court considered an injunction appropriate in light of the history between the parties, the breach of the earlier settlement and evidence that a similar business was continuing through another corporate entity associated with Mr Safi.
Toyota was also awarded its costs, although the Court declined to make a general indemnity costs order. An indemnity costs order was made specifically for the cost of preparing a hard copy court book for Mr Safi, which was wasted when he failed to attend the trial.
Commercial Significance
The decision is significant for brand owners, online retailers and businesses selling aftermarket or compatible products.
First, importation does not operate as an automatic form of trade mark infringement under Australian law. Where a seller imports marked products into Australia as stock for subsequent resale, the orthodox infringement analysis will ordinarily apply. Where goods are drop shipped directly to a purchaser after the retail transaction has occurred, the question can be more complicated. The Court’s application of Fanatics demonstrates that close attention must be paid to when and where the relevant trade mark use occurs and whether the goods remain in the course of trade at that point.
Secondly, the drop-shipping finding should not be treated as a safe harbour for counterfeit goods. The LAND CRUISER armrests escaped the particular trade mark infringement claim, but their sale still gave rise to liability under the ACL and passing off. Businesses cannot assume that the structure of an online fulfilment arrangement will remove the broader risks created by misleading representations about origin, authenticity or approval.
Thirdly, references to another trader’s brand for compatibility purposes are highly contextual. The Court did not establish a universal formula requiring expressions such as “suitable for” or “compatible with”. Clear compatibility wording can nevertheless be important because it helps communicate that an aftermarket product is intended to fit another trader’s goods rather than suggesting that the product originates from that trader.
Fourthly, online advertising can itself amount to Australian trade mark use even where there is little evidence that individual consumers actually viewed the relevant page. A website or social media advertisement directed to Australian consumers can constitute use in the course of trade through the act of offering the goods for sale.
Fifthly, personal liability depends upon the cause of action. A director’s control of a company will not automatically make the director a joint tortfeasor for trade mark infringement or passing off. The statutory test for involvement in an ACL contravention is different, and knowledge, wilful blindness or reckless indifference can expose a director to accessorial liability even where the evidence does not justify treating the company’s tortious acts as the director’s own.
Finally, the judgment illustrates the continuing importance of settlement agreements. The earlier agreement created contractual obligations that were more specific than the statutory trade mark test, made Mr Safi jointly liable for breaches and became a major factor in the Court’s assessment of additional and exemplary damages. A settlement that is ignored may therefore increase rather than conclude the eventual financial exposure.
Toyota v OZI4X4 is ultimately a reminder that counterfeit and aftermarket product disputes rarely turn on trade mark law alone. The particular supply chain, the way the brand is presented, what consumers are likely to understand, the involvement of company officers and the terms of any earlier settlement can each materially change the result.
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