UK: Court Of Appeal Finds That The Criminality Of Grey Goods Can Be Black And White

Last Updated: 3 January 2017
Article by Jo Joyce

The key issue in the case was whether the criminal provisions found at s. 92 of the Trade Marks Act 1994 (the "Act"), apply only to goods marked with a trade mark, without the consent of the trade mark proprietor i.e. counterfeit goods, or whether criminal liability could also attach where the proprietor had authorised such application of the trade mark but not their being placed on the market in the jurisdiction i.e. grey goods. The Court of Appeal, considering a preliminary decision of the Crown Court in St Albans, found that the section could apply to grey goods and therefore the full trial can proceed.

Background

The defendants are alleged to have been involved in unlawfully selling various kinds of branded goods (including Ralph Lauren, Adidas, Under Armour, Jack Wills, Fred Perry goods), all of which were manufactured in countries outside the EU. These include, or may include, goods which had been part of an order placed with an authorised manufacturer by the trade mark proprietor but then cancelled; goods part of a batch whose manufacture had been authorised but which, after manufacture, were rejected as not being of sufficient standard; or goods manufactured, pursuant to an order, with authority but in excess of the required amount (grey goods). It was not alleged that the defendants were importing and selling branded goods which were both manufactured and sold with the authorisation of the proprietor in a country outside the EU (parallel imported goods).

Before the trial could proceed, the court considered whether the criminal provisions of trade mark law, which run alongside those creating civil liability for infringement, would apply where the goods were manufactured with consent but sold without it. The Crown Court decided that the provisions would apply but permitted an appeal of the point.

The Court of Appeal summarised the question before it as:

"Can a criminal offence be committed under s. 92(1)(b) or (c) of the Trade Marks Act 1994 (selling, offering for sale or distribution/possession with a view) where the proprietor of the registered trade mark has given its consent to the application of the sign which is its registered trade mark or has itself applied its own registered trade mark, to the goods, but has not given its consent to the sale, distribution or possession of them?"

The Law

Section 92(1) of the Act provides:

"A person commits an offence who with a view to gain for himself or another, or with intent to cause loss to another, and without the consent of the proprietor — (a) applies to goods or their packaging a sign identical to, or likely to be mistaken for, a registered trade mark, or (b) sells or lets for hire, offers or exposes for sale or hire or distributes goods which bear, or the packaging of which bears, such a sign, or (c) has in his possession, custody or control in the course of a business any such goods with a view to the doing of anything, by himself or another, which would be an offence under para.(b)."

The prosecution claimed that by selling the goods, bearing brand logos, without the rights holders' consent, the defendants had contravened the provisions of s.92(1)(b) of the Act 1994. The wording of the indictment did not distinguish between goods where the manufacture and application of the relevant logo was never authorised by the proprietor and goods where there was such authorisation but where subsequent sale by the factories was unauthorised.

The defendants argued that s.92(1)(b) of the Act, the statutory provision on which the indictment was based, applied only to goods which bore a sign identical to or likely to be mistaken for a registered trade mark, which had been applied without the consent of the proprietor. As some of the alleged instances related to goods where the sign was applied with the consent of the trade mark proprietor, such instances could not constitute a criminal offence and only civil infringement proceedings would offer any remedy.

The Decision

The Court of Appeal dismissed the appeal, finding that the language of s.92 (b) clearly refers to goods or packaging bearing "such a sign". As a matter of ordinary language, those words had to be referred back to s.92(1)(a) of the Act: "a sign identical to, or likely to be mistaken for, a registered trade mark". There was no plausible basis for interpreting the words "such a sign" as also linking back to the word "applies".

The Court found that the defendants' argument was not tenable as it would require the effective redrafting of s.92 and a distortion of its structure. The Court also found that an intention to remove the sale of grey goods from the acts capable of creating criminal liability was contrary to the general scheme of the Act and public policy. The Court noted that here is a "very real issue of public health and safety [which] can arise where the goods are rejected as substandard but nevertheless sold without authorisation"

The Court of Appeal felt that the earlier decision was in keeping with case law, notably the recent Court of Appeal decision in Genis [2015] where it was confirmed that a conviction under s.92 would stand even where a mark had initially been applied with the proprietor's consent. The decision was also in line with academic comment (the Court consulted Kerly's Law of Trade Marks at length).

The issue of grey goods is one of great significance to brand owners and retailers. Whilst this decision is not surprising in the light of Genis it will reassure those rights holders who use the tools that the criminal law provides. It may also serve to highlight the option of criminal proceedings to those who have traditionally confined themselves to civil enforcement action.

Case: R v C & Others [2016]

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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