Sweden: Warehouse Storage Of Copyright-Infringing Products Amounts To Act Of Distribution

On 3 October 2018, Advocate General Campos ("AG Campos" or the "AG") delivered an opinion in Case C-572/17, Riksåklagaren v. Imran Syed, on the extent of the control of the copyright holder in relation to the storage of counterfeit goods in a warehouse.

The issue arose after Mr. Syed had been found by the Court of First Instance in Stockholm to have infringed the copyright and trade marks of various right holders through, on one hand, the sale of clothing and accessories with rock music themed motifs in a store and, on the other hand, the storage of these same goods in warehouses (adjacent to the store and in another district) pending their sale. However, the Court of First Instance also held that there was no trade mark or copyright infringement of the goods which had only been found in the warehouses but did not correspond to any goods sold in the store, as these had not been offered for sale and there had been no attempt or preparation for trade mark or copyright infringement.

On appeal against this judgment, the Patent Court of Appeal in Stockholm partially upheld Mr Syed's appeal with regard to the goods stored in the warehouses that were identical to those sold in the store. It held that while Mr. Syed stored the goods for the purpose of selling them in the store, the goods had not yet been offered for sale or distributed to the public in any other way. Hence, the Patent Court of Appeal concluded that the storage of goods in warehouses does not constitute an attempt or preparation of a trade mark or copyright infringement.

Following an appeal by the Attorney General, the Swedish Supreme Court referred the following questions to the Court of Justice of the European Union (the "ECJ") for a preliminary ruling:

  1. Where goods onto which protected motifs are affixed are unlawfully offered for sale in a store, can there also be an infringement of the author's exclusive right of distribution to the public provided for in Article 4(1) of Directive 2001/29 of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (the "InfoSoc Directive") in respect of goods which are stored in warehouses by the person offering the goods for sale?
  1. Is the fact that the goods are stored in a warehouse adjacent to the shop or in another place of importance?

To examine these questions, AG Campos referred to the Dimensione Direct Sales case (C-516/13) which addressed the advertising for sale of copyright protected works (see this Newsletter, Volume 2015, No. 05, available at www.vbb.com). In this case, the ECJ held that the concept of distribution to the public within the meaning of Article 4(1) of the InfoSoc Directive covered the preparatory acts for the sale of the object, including offering for sale and advertising. According to the ECJ, advertising a product may constitute a form of distribution insofar as it invites consumers to purchase a good, irrespective of whether or not such advertising was actually followed by the transfer of ownership of the protected work to the purchaser. For the ECJ, a purchase is not necessary for the finding of an infringement of the right of distribution.

Similar to advertising, AG Campos found that the storage in warehouses of clothing identical to items offered for sale in a store is an activity that belongs to the chain of operations intended for the marketing of these goods to end consumers, and hence falls under the concept of distribution to the public as provided for by Article 4(1) of the InfoSoc Directive. For the AG, the offer to sell is not limited to products exposed in a specific commercial establishment, but also applies to identical products that are provisionally stored in a warehouse of the seller to replace products once exhausted. The products in the store represent all the products available for sale, whether in the store or in a warehouse.

The AG therefore concluded that the right to oppose the distribution of copyrighted reproductions extends to the goods stored in the seller's warehouses that are identical to those sold in the store.

According to the AG, this interpretation is in line with the exclusive right provided for in Article 6(1) of the WIPO Copyright Treaty, which includes preparatory acts for sale, and with the objective of the InfoSoc Directive to offer a high level of protection of intellectual property rights.

The AG also pointed out that this interpretation ensures the effectiveness of Article 4(1) of the InfoSoc Directive, which aims to prevent the marketing of goods manufactured in violation of a copyright, and thus enables a preventive control of the distribution of protected works. If such control could only be exercised once the sale is concluded, the effective protection of the distribution right would be compromised, given the difficulties in verifying where and when items are sold.

In this context – and this answers the second preliminary question of the Swedish Supreme Court – AG Campos found that the distance or proximity of the warehouses to the store is irrelevant. Indeed, if the size or colour requested by a customer were to be unavailable in the warehouse attached to the store, Mr. Syed would be quick to fetch the desired product from the warehouse located in the other district. Such act would also be part of the chain of operations undertaken to achieve the sale of the required item.

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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