The English Court of Appeal has confirmed that, in the UK, the sale or distribution of trade mark goods outside an authority granted by the trade mark holder can constitute a criminal offence (R v C and others, applying Trade Marks Act 1994 (the “Act”) s92(1)*). Possession with a view to sell/distribute such goods is also a criminal offence.

The defendants were a company selling shoes and clothing, and various individuals involved in managing the company. The defendants had manufactured a certain quantity of goods under a trade mark with the trade mark owner’s authority, but in some instances had gone outside the authority or had the authority withdrawn – for example, because the goods were produced in excess of a required order, were part of a cancelled order, or were rejected on the grounds of insufficient quality. The prosecution case related to these goods produced or dealt with outside the trade mark owner’s authority.

The defendants argued that (a) the UK Parliament could not have intended such harsh, criminal consequences in these circumstances, and (b) persons engaged in parallel importation could be vulnerable to criminal prosecution and prosecution – catching, say, a young student who purchased a pair of legitimately branded jeans in the US (where the trade mark holder had granted permission to sell the jeans under the trade mark) then sold them on eBay in the UK (where such permission had not been granted). The English Court accepted that the outcome might be tough for certain users, but said that the law was unambiguous, and that defendants would still have a statutory defence under s92(5) of the Act if they could show that they believed on reasonable grounds that the use of the sign in the manner in which it was used, or was to be used, was not an infringement of the registered trade mark.

This Judgment will be welcomed by trade mark owners, for whom it provides a powerful weapon, and will send a shiver down the spine of companies and individuals engaged in the “grey” market in Europe. The European grey market largely comprises the trade in trade mark goods that were first put on the market with the consent of the trade mark holder (this grey market is legal because, under European law, the trade mark holder thereby “exhausts” its rights in the mark in relation to those goods, and cannot use its mark thereafter to control their distribution). The problem for dealers in grey goods will be to how to show why they believe that the trade mark holder had consented to the goods coming onto the market – for example, by means of an audit trail leading back to the trade mark holder’s consent. If they cannot, then they risk criminal sanctions.

* s92(1) of the Trade Marks Act 1994 (the “Act”) provides that 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: (i) applies to goods or their packaging a sign identical to, or likely to be mistaken for, a registered trade mark; (ii) 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; or (iii) 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 (ii) above.