7 August 2017Trademarks

Grey market sales can be criminal offence, says UK Supreme Court

The sale of grey market goods can be treated as a criminal offence, according to the UK’s highest court.

On Thursday, August 3, the UK Supreme Court, in a decision on an interlocutory appeal in criminal proceedings, handed down its finding centring on section 92(1) of the Trade Marks Act 1994.

Section 92(1), which covers the unauthorised use of trademarks, reads as follows:

“(1) 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 trademark, 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, or

(c) has in his possession, custody or control in the course of a business any such goods with a view to the doing of anything, by himself or another, which would be an offence under paragraph (b).”

The defendants, a company and two individuals, were engaged in the importation and sale of clothes and shoes that were made outside the EU.

Many of the goods were said to bear what appeared to be trademarks of well-known brands including Ralph Lauren, Adidas and Under Armour.

Although some of the goods were alleged to be counterfeits, the manufacture of a significant proportion of the goods had originally been authorised by the registered trademark owners, but the sale of such goods had not been authorised.

“Some might have been made under a permission which was cancelled by the trademark owner; that in turn might include cases where the trademark owner was dissatisfied with the quality and not prepared to have the goods put on the market as if their own, but cancellation might not be limited to that cause,” said Lord Hughes on behalf of the court.

The court was tasked with deciding whether criminal liability would only arise in relation to “true counterfeits” and not also in the case of legitimate goods on the grey market.

According to the appellants (defendants), the expression “such a sign” in subsection (1)(b) refers back to subsection (1)(a) and, by referring back, it means that (b) only applies to goods where the relevant sign has been applied without the consent of the trademark owner (ie, not grey market goods).

But the Supreme Court didn’t agree—finding that the offences set out in paragraphs (a), (b) and (c) of section 92 are, “as a matter of plain reading, not cumulative, but separate”.

“It is not necessary that one has been committed (by someone) before one can say that the next in line has been,” added Hughes, with whom Lords Neuberger, Mance, Sumption and Hodge agreed.

Hughes said: “Nor is there any reason to strain the language of section 92(1)(b) so as to exclude the sale of ‘grey market’ goods.”

The court dismissed the appeal and ordered that the trial may proceed.

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