The Supreme Court has held that the criminal sanctions under section 92(1) of the Trade Marks Act 1994 (“the Act”) will apply to the sale or so called “grey” market goods as well as counterfeit goods.
The Supreme Court’s judgment, handed down last week, is good news for trade mark owners who may be considering seeking criminal sanctions against unauthorised dealers in grey and counterfeit goods, in addition to any civil remedies, even if trading standards or the police are reluctant to take action. This could prove a useful weapon in a trade mark owner’s enforcement strategy, particularly where an importer of grey goods, weighing up the financial sanctions or risk of an injunction being imposed upon them under the civil system, has decided that the rewards outweigh the risks. The possible criminal sanctions include a fine or imprisonment for up to 10 years.
The case (which has not yet reached trial) concerns bulk importation and sale of clothes, shoes and other goods affixed with the trade marks of leading fashion brands. The Supreme Court considered an interlocutory appeal in relation to the correct construction of section 92(1) of the Act; in particular whether it was an offence to sell goods which bear a trade mark owner’s mark without its consent, even where the trade mark owner had consented to the trade mark being applied to the goods. This subtle distinction required the Supreme Court to consider whether the criminal provisions apply to “grey market” goods as well as counterfeit or “black market” goods.
There are many reasons why such “grey market” goods may be produced; in the fashion industry such goods are called “cabbage” and are often the result of over-order necessary to take account of defects in production and are not authorised for sale (either in certain markets or at all) by the trade mark owner. In other cases, excess goods may be produced by manufacturers (or opportunistic employees) with the ulterior intention of making a quick and easy profit.
The Supreme Court held in no uncertain terms that section 92(1) did apply to such goods, and that any other interpretation would be “strained and unnatural“. The appellants’ arguments that it was necessary to refer to parliamentary debates to help ascertain parliament’s intention, and that the Crown’s construction of section 92(1) breached their Human Rights, were both given short shrift. Whether the goods were “grey” or “black”, Lord Hughes, in his leading judgment, held that “both are clear infringements of the rights of the trade mark proprietor” and both involve a deception of the buying public.”
There is a defence under section 92 if the infringer “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“. The onus is on the infringer to prove such a belief. This is particularly relevant to grey market goods, where it is only the sale which the trade mark owner has not consented to. This will provide a defence to “innocent” infringers, such as those who acquire products in good faith.
Trade mark owners wishing to take advantage of the criminal provisions should note:
- Criminal sanctions require the trade mark owner to prove their case to a higher standard of proof; “beyond reasonable doubt” rather than the lower standard of “on the balance of probabilities”.
- The onus will be on the trade mark owner to prove the infringer is guilty of acting without the trade mark owner’s consent. This is as opposed to civil cases where the infringer must prove it is more probable than not that the brand owner did consent to the infringers actions.
- The trade mark owner must also prove the infringer acted “with a view to making a gain for himself or causing a loss to another person” unlike civil cases where motive is irrelevant.
- To try to prevent the “innocent infringer” defence, trade mark owners should consider including a positive obligation in contracts with manufacturers, not to resell surplus stock. This may help to rebut any evidence provided by the infringer that their belief was reasonable.