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UK Supreme Court holds that grey market sales can be criminal offence

 

Can grey markets be considered akin to trade in counterfeit goods, at least when it comes to the application of criminal provisions in trade mark law?

The UK Supreme Court answered this question in the affirmative earlier this week in its judgment in R v M & Ors [2017] UKSC 58.

Issued in the context of an interlocutory appeal in criminal proceedings, this ruling concerned the proper construction of section 92(1) of the UK Trade Marks Act 1994. This provision states that:

“(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 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, 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).”

As explained by Lord Hughes, the defendants in this case are said to be involved in the bulk importation and subsequent sale of goods such as clothes and shoes, bearing the trade marks of well-known brands (Ralph Lauren, Adidas, Under Armour, Jack Wills, Fred Perry or similar).

Manufactured outside the EU, the products imported by the defendants are in part counterfeit goods. However, a “significant portion of the remainder of the goods” are legitimate products whose sale, nonetheless, for various reasons had not been authorized by the relevant trade mark owners. Such goods are those appearing on the grey market.

The point for the UK Supreme Court to address was whether, while civil liability would arise in any case of unauthorized use of a third-party trade mark, a criminal offence could only subsist in the case of “true counterfeits”, not also legitimate goods sold on the grey market.

This would be because the expression “such a sign” in subsection (1)(b) refers back to subsection (1)(a). And by referring back to (1)(a), subsection (1)(b) would only apply to goods where the relevant sign (ie trade mark) has been applied without the consent of the proprietor.

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