Facts
Madrid Trial Court 18 decision
Appeal
Madrid Court of Appeal decision
New Madrid Trial Court 18 decision
New Madrid Court of Appeal decision
On 6 October 2021, the Madrid Court of Appeal decided in favour of the trademark owners in a trademark infringement case. The Madrid Court of Appeal had previously upheld an appeal filed by the same trademark owners, nullifying the first-instance acquittal judgment, which had classified the facts as a misdemeanour (and not as a criminal offence) and determined that the statute of limitations for misdemeanours had lapsed (for further details, please see "Second-instance court nullifies acquittal due to incorrect interpretation of IP crime").
The proceedings started with the seizure of garments which illegally reproduced several well-known trademarks from a stall at the Outlet Fair that took place in the Glass Pavilion of the Casa de Campo, Madrid. The defendants were responsible for the stall and one of them was the manager of a company that dealt with the garments' storage, distribution and commercialisation.
Madrid Trial Court 18 decision
Madrid Trial Court 18 declared as proven the fact that the defendants had deliberately commercialised products which infringed the trademark rights of other parties with the intention of seeking profit. However, it declared that such actions constituted a misdemeanour instead of a criminal offence and acquitted the defendants, determining that the statute of limitations for a misdemeanour had lapsed.
While considering the facts to be a misdemeanour, Madrid Trial Court 18 of Madrid did not take into account the need for the requirements mentioned in article 274.2 of the Criminal Code in force at the time of the events to concur cumulatively. It was considered that the occurrence of only one such requirement (ie, profits below €400) justified the application of the attenuated offence (ie, a misdemeanour).
Despite having been acquitted, the defendants appealed the sentence based on the alleged violation of their presumption of innocence right (for the facts which the first-instance sentence had declared as proven), alleging that:
- they had not known that the garments were fake; and
- the garments could not be confused with the originals.
The trademark owners also appealed the sentence, arguing that the court had incorrectly applied the mitigated subtype of criminal offences against intellectual property, making the case a misdemeanour (meaning that it carried lower penalties and shorter statutes of limitation than a criminal offence). The trademark owners requested the nullity of the sentence so that the first-instance court could issue a new judgment to rectify its previous erroneous legal assessment.
Madrid Court of Appeal decision
In a judgment issued on 2 February 2021, the Madrid Court of Appeal dismissed the appeal filed by the defendants and upheld the appeal filed by the trademark owners, thus nullifying the first-instance court's acquittal so that Madrid Trial Court 18 could issue a new sentence without modifying the proven facts or having to hold a new trial hearing, but considering the Madrid Court of Appeal's interpretative guidelines regarding how article 274 of the Criminal Code should be interpreted to assess whether the trademark infringement committed was a criminal offence or a misdemeanour.
New Madrid Trial Court 18 decision
Following the aforementioned interpretative guidelines and without modifying the proven facts of its first sentence, Madrid Trial Court 18 issued a new sentence on 22 April 2021. It sentenced the defendants – as perpetrators of a trademark infringement criminal offence – to:
- four months in prison; and
- jointly and severally compensate the trademark holders in the amounts to be determined during the enforcement phase of proceedings.
This new judgment was, once again, appealed by the defendants.
New Madrid Court of Appeal decision
The Madrid Court of Appeal responded to the defendants' appeal in a new judgment dated 6 October 2021.
First, the Madrid Court of Appeal held that, contrary to what had been argued by the defendants, the proven facts established in the original sentence remained unchanged in the second judgment issued by Madrid Trial Court 18. The Madrid Court of Appeal pointed out that the new judgment considered that the proven facts constituted a trademark infringement criminal offence and not a misdemeanour. The Madrid Court of Appeal highlighted that, this time, Madrid Trial Court 18 had correctly assessed whether all the requirements mentioned in article 274.2 of the Criminal Code were met cumulatively, and not just one of the requirements (ie, lack of profit greater than €400). This was the reason why the first-instance court had wrongly considered that what had been committed was a misdemeanour and not a criminal offence in its first judgment.
The defendants' second argument was that the facts fitted with the "retail distribution" scenario of minor importance referred to in the second paragraph of article 274.2 of the Criminal Code which was in force at the time of the events. The defendants alleged that "the characteristics of the culprit" also referred to in this article had not been correctly assessed. The Madrid Court of Appeal responded that it was faced with a commercial activity that the defendants had carried out through a company, the managing director of which was one of the defendants. The other defendant was a collaborator of such company, registered before the Trade Registry with a corporate purpose corresponding to the wholesale trade of clothing. The company had an international reach and deposited its annual accounts, which amounted to millions of euros in 2013-2015, with the Trade Registry.
The Madrid Court of Appeal also reiterated in its ruling that a total of 383 garments had been seized during the Outlet Fair held in the Glass Pavilion in Madrid. This evidenced:
- the professionalism of the commercial activity that the defendants had been conducting through the company; and
- that they were not people in a situation of destitution or poverty, or in a special state of need.
The Madrid Court of Appeal also responded to the alleged lack of accreditation of the confusability between the seized products and the genuine articles. The defendants raised this argument to sustain the atypical nature of the conduct prosecuted, an argument that the Madrid Court of Appeal had already rejected in its first sentence handed down within the framework of the present procedure.
In this regard, the Madrid Court of Appeal insisted, in its second sentence, that the legal right protected by article 274 of the Criminal Code is the right of exclusive use of certain signs or marks that have obtained its administrative and commercial recognition, even though, indirectly, this may have repercussions for the benefit of consumers and the market itself. The Madrid Court of Appeal confirmed that it is indeed evident that such distinctive signs have a transcendent commercial and economic value that deserves to be protected directly by the Criminal Code.
For further information on this topic please contact Angel Escoriaza at Grau & Angulo by telephone (+34 91 353 36 77) or email ([email protected]). The Grau & Angulo website can be accessed at www.ga-ip.com.