Trade marks: sale of grey goods as criminal offence

Background

A person commits an offence if, with a view to gain for himself or with intent to cause loss to another, and without the trade mark owner’s consent, he:

• Applies to goods or their packaging a sign identical to, or likely to be mistaken for, a registered trade mark (section 92(1)(a), TMA).
• Sells, lets for hire, offers or exposes for sale or hire, or distributes goods which bear, or the packaging of which bears, a sign identical to such a sign (section 92(1)(b), TMA) (section 92(1)(b)).
• Has in his possession, custody or control, in the course of a business, any such goods with a view to sale or hire (section 92(1)(c)).

A sign could be identical with a registered trade mark for the purposes of civil liability under section 10 of the TMA where the sign had been applied to goods with, but then disposed of without, the trade mark owner's authorisation (grey goods) (Levi Strauss Inc v Tesco Stores Ltd).

Facts

C was alleged to have contravened section 92(1)(b), by unlawfully selling in the UK branded goods which were manufactured in countries outside the EU. It was alleged that some of the goods were fake and counterfeit but that many of the goods had been manufactured by factories with the trade mark owner's consent, and then disposed of without the owner's authority. These included goods, for example, which had been part of an order placed with an authorised manufacturer by the trade mark owner but then cancelled, or whose manufacture had been authorised but which were rejected as sub-standard.

The Crown Court held that there was no distinction between goods where the manufacture and application of the relevant logo was never authorised by the trade mark owner, and goods where there was initial authorisation but where the subsequent sale, distribution of possession was unauthorised.

C appealed, arguing that section 92(1)(b) 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 owner.

Decision

The court dismissed the appeal. It held that the sale of grey goods was a criminal offence.

The court rejected C’s argument that a criminal offence can only be committed under section 92(1)(b) or (c) in the case of goods to which a sign identical or likely to be mistaken for the trade mark had been applied without the trade mark owner's consent.

Although Levi Strauss dealt with civil liability under section 10 while section 92 dealt with criminal liability, there was no basis for giving a different meaning or approach to the like phrase as used in section 92.

Trade mark violation undermined the value of a brand and affected legitimate trade. In some cases, real issues of public health and safety could arise where the goods were fake. Potentially harsh consequences for certain users had to be set against the unscrupulous conduct of those exploiting to their own advantage, and to the detriment of trade mark proprietors and consumers. Overall, Parliament had weighed the balance and set out its view in the clear wording of section 92(1).

In all cases, the prosecution had to prove to the criminal standard the essential ingredients of the offence which, in the case of grey goods, might be particularly difficult. If appropriate, section 92(5) also provides a statutory defence for a person charged with an offence under section 92 to show that he believed on reasonable grounds that the use of the sign in the manner in which it was used, or was to be used, was not an infringement of the registered trade mark.

Comment

This decision will be of interest to trade mark owners as it confirms that the trade mark offences under section 92 apply to the distribution and sale of grey goods as well as counterfeit or fake goods. This is of practical importance given the extent to which grey goods are sold and distributed without the trade mark owner's consent, particularly in parallel import cases.

Case: R v C and others [2016] EWCA Crim 1617.

First published in the December 2016 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.