In an important ruling, the UK Supreme Court has confirmed that the criminal offence provisions in S92(1) of the Trade Marks Act 1994 (TMA) apply to grey market goods as well as counterfeit goods.

S92(1) TMA makes it an offence to apply to goods or their packaging a sign identical to, or likely to be mistaken for, a registered trade mark, or to sell (or keep with a view to selling) goods bearing such a sign, in each case without the consent of the trade mark owner and with a view to gain or with intent to cause loss.

In this case, the appellants were alleged to have been involved in importing into the EU and selling clothes and shoes bearing the trade marks of well-known fashion brands. Some of the goods were counterfeit (fakes) as they had been manufactured by people who were neither the trade mark owner nor authorised by the owner to make them. Some of the goods, however, had been manufactured with the trade mark owner’s consent under contract, but subsequently sold without its consent. These are known as grey market goods. Grey market goods come about in various ways. For example, they might be rejects (where the trade mark owner has licensed a factory to manufacture clothing on its behalf but has subsequently rejected some of those goods because of their poor quality), or overruns (where goods are manufactured to the trade mark owner’s order but in excess of the required amount). The rejects or overruns then find their way onto the market. The Supreme Court was asked to rule on whether the criminal offences in S92(1) distinguish between the two different provenances or apply equally to both counterfeits and grey market goods.

The Supreme Court held that S92(1) applies to both counterfeit and grey market goods. It rejected the appellants’ primary argument concerning the drafting of S92(1), holding that S92(1)(b) created a standalone offence of selling goods bearing a sign identical to, or likely to be mistaken for, a registered trade mark. It was not necessary, the court said, for that sign to have been applied to the goods without the consent of the trade mark owner. Such an interpretation would be “strained and unnatural”. The court was satisfied that there was no ambiguity or obscurity in the language of S92(1) which would justify the court referring back to the Parliamentary debate on the TMA with a view to understanding what Parliament had intended the TMA to achieve. It was also satisfied that reference back to the wording of the predecessor of s92, S58A Trade Marks Act 1938, would not shed any helpful light on the meaning to be given to S92(1) either.

This ruling is good news for brand owners. Although they have always been able to bring civil trade mark infringement proceedings in relation to grey goods, this ruling gives them another weapon via the criminal proceedings route to prohibit the unauthorised sale of grey goods bearing their trade mark. Trading Standards initiate most criminal prosecutions under s92 TMA but these proceedings are not always their first priority. Grey goods are seen as causing less damage to the consumer as there is no misrepresentation as to the ultimate manufacturing trade source and often there are complex contractual issues relating to sales contracts between non-EU based third parties, which Trading Standards are reluctant to investigate. It has always been open to brand owners to pursue a private criminal prosecution under s92 TMA. This decision clears the way for brand owners to use such private criminal prosecutions against those who unlawfully import grey goods into the UK.