Teal blue graphic

'Grey goods' not a grey area - Court of Appeal confirms sale of grey goods can be a criminal offence

The Court of Appeal has confirmed in R-v-C and Others [2016] EWCA Crim 1617 that a criminal offence can be committed under section 92(1) of the Trade Marks Act 1994 (TMA) through the sale of grey goods.

This news will have implications for trade mark holders.

Grey goods are goods to which a trade mark owner has authorised the application of its trade mark but not the subsequent use, sale or disposal of those goods.

Background

The Defendant was a company selling shoes and clothing.  It was alleged to have engaged in activities contravening section 92 of the TMA, which sets out the criminal provisions and sanctions under the TMA.

Under section 92 TMA, a person commits an offence, if with a view to gain for himself or with intent to cause loss to another, and without the consent of the trade mark owner, he:

  • Applies to goods or their packaging a sign identical to, or likely to be mistaken, for a registered trade mark (s.92(1)(a)).
  • Sells, lets for hire, offers or exposes for sale or hire, or distributes goods which bear, or the packaging of which bears, a sign identical to such a sign (s.92(1)(b)).
  • Has in his possession, custody or control, in the course of business, any such goods with a view to the doing of anything, by himself or another, which would be an offence under paragraph (b) (s.92(1)(c)).

The Defendant was alleged to have been involved in the unlawful sale in the UK of various branded goods, all manufactured outside the EU.  Not all the goods were alleged to be fake or counterfeit; some had been manufactured by factories with the trade mark owners consent and then disposed of without its permission.  This included goods forming part of an order placed by the trade mark owner but then cancelled or rejected as not being of sufficient standard.

The key issue was whether a criminal offence could be committed under s92(1)(b) or (c) TMA where the trade mark owner had consented to the application of its mark to goods but not to any subsequent sale or distribution. 

The Defendant had appealed on a point of law: Its position was that s92(1)(b) and (c) TMA only applied to goods to which a trade mark had been applied without the authorisation of the trade mark owner i.e. counterfeit goods.

Decision

The appeal was rejected.  The Defendant's position was held to be unsupported by the wording of section 92 TMA and authority, including case law and the leading textbook in the field.

The Defendant's construction of section 92(1)(b) and (c) TMA was held to be contrary to the heading and wording of section 92.  As a matter of statutory interpretation the words in section 92(1)(a) clearly covered circumstances where a trade mark had been applied with or without the trade mark owner's consent.

This conclusion was held to be supported by the leading text book in the field (Kerly's Law of Trade Marks) which considered that section 92 TMA had a broad application covering not only counterfeit goods but also potentially grey goods.  It was also held to be supported by the Court of Appeal's recent decision in Genis [2015] EWCA Crim 2043 where the defendant was convicted under section 92 TMA and where some of the goods in his possession were grey goods to which the trade mark had been applied with the trade mark owner's consent.

Public policy considerations were also held to support the application of section 92 TMA to the distribution and sale of grey goods as well as counterfeit or fake goods. The Court held that a cheap sale of an unauthorised product can undermine the brand value and reputation of a trade mark owner and can be a threat to consumer or public health and safety. 

Whilst the Court accepted that the need to deter unscrupulous grey market traders could lead to tough outcomes in certain cases, it was said that the high criminal standard of the offence may be particularly difficult to prove in the case of grey goods.  Even then, a defendant may have a statutory defence if it can show that it believed on reasonable grounds that it was not infringing the trade mark owner's rights.  In more border line cases, the decision to prosecute will be in the discretion of trading standard officers.  

Implications

This decision will be of interest to brand owners: It confirms that the criminal sanctions under section 92 TMA apply to the distribution and sale of grey goods as well as to counterfeit and fake goods.

Practically, trade mark owners now have a further means to control the sale and distribution of grey goods and can encourage Trading Standards to take enforcement action or launch their own private prosecutions under the TMA. 

Contributor: Asima Rana


This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.




Insights & events View all