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Inside IP: Good news for trade mark owners: Sales of 'Grey' goods can be a criminal offence

Posted on 9 August 2017 by Peter Nunn & Cassandra Hill

Inside IP: Good news for trade mark owners: Sales of 'Grey' goods can be a criminal offence

The Supreme Court has confirmed that criminal trade mark offences can apply not only to the distribution and sale of counterfeit goods (fakes) but also to 'grey' goods. Grey goods are ones that bear a registered trade mark and were produced with the trade mark owner's consent, but which the trade mark owner had not permitted to be released onto the market.
Whilst this is not necessarily a surprising result, it is a welcome one, and may be a useful weapon in a trade mark owner's arsenal against unauthorised use of its trade mark. 

The appellants in this case challenged a Court of Appeal decision (which we reported here) that they could be prosecuted for unlawfully selling various branded goods, some of which were counterfeit and some of which were grey goods. The latter included orders that had been placed by various trade mark owners but then cancelled, and goods that were rejected as not being manufactured to a sufficient standard.

What does the law say?

Under section 92(1) of the Trade Marks Act 1994, an offence is committed where a person carries out any of the following three acts, with an intent to gain or to cause loss, and without the consent of the trade mark owner: (a) applies to goods "a sign which is identical to, or likely to be mistaken for, a registered trade mark”, (b) sells goods which "bear such a sign”, or (c) possesses in the course of a business any such goods with a view to committing an offence under (b).

The appellants argued that the wording “such a sign” in subsection (b) referred back to (a), so that the offence under (b) – that is, selling goods – applied only to goods where the trade mark had been applied without the owner's consent. Hence it would only be an offence to sell counterfeit goods, but not grey goods.

How did the Supreme Court interpret this?

The Supreme Court held that the three offences under s.92(1) are not cumulative, but separate, stand-alone offences. Therefore, an offence could be committed by selling "grey" goods – the goods do not need to be counterfeit.
The court also rejected the argument that this result would be a disproportionate breach of the appellants' right to the peaceful enjoyment of their possessions under the European Convention on Human Rights. Although the appellants had a right in the goods, the statute neither deprived them of, nor stopped them selling, those goods, except if they did so with the misleading and infringing trade mark attached.
There is a strong argument that unauthorised parallel imports – that is, goods manufactured and sold with the authorisation of the registered trade mark owner in a non-EU country but which have subsequently been imported and sold in the EU without consent – could also potentially be a criminal offence, although the court did not comment explicitly on this point.
A criminal trial as to whether the appellants are guilty of trade mark offences will now proceed. Please click here to read the Supreme Court judgment.

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