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Enhanced support for brand owners in battle against counterfeits and grey goods

Posted on 10 November 2017

Enhanced support for brand owners in battle against counterfeits and grey goods

Circulation of counterfeit goods remains a significant issue for brand owners, causing loss of revenue and reputation as well as undermining consumer confidence. It is fuelled by the continued rise in internet shopping, with a recent UK IPO study finding that counterfeit goods accounted for 17.5% of online transactions and identifying social media as the “most distinctive medium for communication” for counterfeit sales. An EU IPO study has also recently highlighted the practice of e-shops that infringe trade marks by systematically re-registering domain names that were previously used by famous people, organisations and businesses.  

Rights holders can, however, gain comfort from protections afforded them by recent UK court decisions and targeted initiatives.

Sales of "grey" goods can be a criminal offence

Criminal trade mark offences can apply not only to the distribution and sale of counterfeit goods but also to 'grey' goods, under a Supreme Court ruling. Grey goods bear a registered trade mark and were produced with the trade mark owner's consent, but were never permitted to be released onto the market. In this case, the appellants unsuccessfully challenged a Court of Appeal decision that they could be prosecuted for unlawfully selling various branded goods, some of which were counterfeit and some of which were grey goods.

The decision also provides a strong argument that unauthorised parallel imports – that is, goods manufactured and sold with the trade mark owner's authorisation 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.

It will also allow brand owners to bring private prosecutions against anyone trading in grey goods, as well as counterfeits. Private prosecutions allow victims of crime greater control over the case and costs, and send a strong message to counterfeiters and those trading in grey goods, who face up to 10 years in prison where successfully convicted. 

Website blocking orders against sites selling counterfeits

Last year, the Court of Appeal confirmed that the courts can make orders against ISPs requiring them to block their customers from accessing websites selling counterfeit products, upholding an order in relation to six websites selling counterfeit Cartier and Mont Blanc products.

In the last six years or so, the UK courts have granted a number of orders against ISPs requiring them to block access to websites which engage in or facilitate copyright infringing activities. Website blocking orders have been particularly attractive to the entertainment and sports broadcasting industry: orders have been sought by film studios, record companies and the FA Premier League. As we have reported, the Court of Appeal's decision extending this jurisdiction to websites selling counterfeit products based on trade mark infringement is a significant development for brand owners in their ongoing fight against counterfeiting. However, there has not yet been a raft of similar applications by brand owners, no doubt due to the outstanding appeal which will be heard by the Supreme Court in January 2018. The appeal will not focus on whether such orders can made as that is a settled issue; instead the appeal will focus on who should bear the costs of implementing the website blocking order, the brand owner or the ISP?

Both these decisions show the courts' willingness to adapt available remedies in new ways to help prevent counterfeit sales, but the industry also needs support from online retailers. In a bid to prevent the circulation of counterfeit goods within its market place, for example, eBay has launched eBay Authenticate™. Electronic 'authenticity verified' labels will be applied to listings for luxury handbags and wallets valued at $500 or more from designers such as Burberry, Céline, Chanel, Fendi, Gucci, Hermès, Louis Vuitton and Prada, letting shoppers know that their purchase is legitimate. Hopefully other online retailers will follow suit.

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