Traders purchasing branded goods outside the official distribution chain run the risk of not only being liable for trade mark infringement, but exposing themselves to criminal sanctions, including fines and imprisonment for directors and officers. Such goods may be counterfeit, or "grey market" goods, which are goods put on the market by the brand owner outside the EU (such as in the US) and imported into the EU without the consent of the brand owner.
Many years ago, Tesco was found to have infringed Levi's trade marks by purchasing Levi jeans put on the market in the US and imported into the EU without Levi's consent. Such an act occurring now could amount to a criminal offence.
Section 92 of the Trade Marks Act 1994 sets out a number of criminal sanctions for dealing in infringing products. This section has been used to prosecute counterfeiters in the UK but there has been some dispute as to whether or not it would extend to those dealing in grey market goods. Section 92(1) states:
"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..."
Section 92 (5) states:
"It is a defence for a person charged with an offence under this section 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".
In a criminal case before the Supreme Court, R v M, R v C, and R v T this month, the Court considered the scope of this criminal provision and whether it could apply to dealing in grey market goods. The appellants in this case were a limited company and two individuals connected with its management. They had been indicted for various offences relating to the sale of counterfeit goods, grey market goods and overruns, and sought clarification on the scope of section 92.
The Supreme Court considered the arguments and held that:
i. The term "such a sign" in section 92(1)(b) does not only refer back to goods where the trade mark has been applied without the consent of the proprietor (as required under section 92(1)(a)).
In essence, the appellants were arguing that the grey market goods had their trade mark applied with the consent of the proprietor (and so it was not an offence). The court confirmed that each offence, as set out in each paragraph, is separate and the opening words of the paragraph (e.g. "gain for himself or another" or "without the consent of the proprietor") applied to each separate offence. As such, the court said that "the appellants reading of paragraph (b) is....strained and unnatural. It does not simply reach back to (a) but to the general words of the section which precede it". So, the phrase "such a sign" should be read as "which bears a sign, so applied" or "such a sign, so applied".
ii. The old 1938 legislation did not support such a narrow interpretation and, on the proper construction, the old Act applied to grey market goods too.
iii. The application of this section to grey market goods did not involve a disproportionate breach of the appellants' rights under article 1 of the European Convention of Human Rights. In particular, the legislation does not prevent a person from disposing of their property. It simply controls the manner of sale and what marks are attached.
The court confirmed "that is a perfectly legitimate balance to draw between the rights of the proprietor to protect his valuable trademark and goodwill, and those of the person who wishes to sell goods which he has bought".
The appeal was therefore dismissed and the trial should continue.
Paul Cox, partner in the intellectual property team said: "This is a clear indication that the trade in unlawful grey market goods is a criminal offence which may not only lead to the prosecution of businesses and companies but their officers too. It remains to be seen if trading standards will prioritise such cases by prosecuting them given their limited resources. My best guess is that trading standards will not bring such actions unless combined with the sale of counterfeit goods. However, rights holders can bring a private criminal prosecution against such infringers."