Trademarks - Trading in Grey Goods Can Be a Criminal Offence

Background

The case concerns a criminal prosecution brought for trade mark infringement. The defendants are alleged to have been involved in the unlawful sale in the UK of various branded products, which had been manufactured outside the European Union.

The goods in issue can be classified into two categories. First, it is alleged that some of the goods were fakes or counterfeits - they were not manufactured either by the brand owner or a licensed third party. Second, it is alleged that some of the goods were grey goods - they were manufactured by factories with the consent of the brand owner, but were subsequently disposed of without the brand owner's consent - including reject goods of substandard quality.

The defendants argued that section 92 of the Trade Marks Act 1994, which sets out the framework for criminal liability, should apply to only the first category of goods in issue (fakes or counterfeits) and not the second category (grey market goods). The prosecution argued that no such distinction should be drawn and that criminal liability should potentially attach to trade in both types of goods.

The Court of Appeal's Decision

The Court of Appeal found in the prosecution's favour and ruled that trade in grey goods can also constitute a criminal offence - where all the elements of the offence are present and no defences apply. The Court stated this proposition was clear from the wording of section 92 and was supported by earlier case law. The Court also highlighted, from a public policy perspective, the need to curtail the trade in grey goods which can: (1) dupe a customer and diminish the overall value of the trade mark and (2) give rise to very real issues of public health and safety, for example where the goods are rejected as sub-standard.

Comment

The importance of the decision is two-fold. (1) It provides brand owners with another means of pursuing traders of grey goods through criminal prosecutions brought either by Trading Standards or themselves. (2) The decision raises the possibility of criminal prosecution in respect of another category of grey or parallel-traded goods not covered by this case: i.e. products manufactured and originally put onto the market by the brand owner in the country of export (or with its consent), but where the trade mark owner in the country of import can legitimately prevent their sale there. The Court did not feel compelled to give a definitive view on this class of goods given none were in issue. However, the Court did opine that such a prosecution might not be straightforward and highlighted that it is a defence under section 92 (5) for the accused to show that they believed on reasonable grounds that the trade mark use in question was not an infringement.

For further information, please contact Tom Cahill on 01923 919 330.