The Supreme Court has confirmed [link https://www.supremecourt.uk/cases/docs/uksc-2017-0006-judgment.pdf] that it can be a criminal offence to offer for sale “grey goods”. In doing so, it has established that brand owners have the option of bringing a criminal action not just in respect of counterfeit goods but also in respect of grey goods to combat the significant losses caused each year due to trade mark infringements.
Before the ruling, which has also been reported upon by the Mishcon IP team [https://www.mishcon.com/news/briefings/inside-ip-good-news-for-trade-mark-owners-sales-of-grey-goods-can-be-a-criminal-offence], it was well-established that brand owners could commence private prosecutions against anyone who was trading in counterfeit goods but the Supreme Court has now confirmed that this option extends to those who trade in grey goods. It is arguable that this also extends to unauthorised parallel imports but the Supreme Court did not explicitly comment on this point.
What are grey goods?
These are items which have been produced with the brand owner’s consent but are then sold/disposed of without the owner’s consent, for example where they do not meet the owner’s quality control.
Briefly, the decision in R v M, C and T concerned the interpretation of section 92(1) of the Trade Marks Act 1994 ("TMA").
Section 92(1) TMA makes it a criminal offence for a person to either apply a sign which is identical to or is likely to be mistaken for a registered trademark, sell or distribute goods which bear such a sign or, in the course of its business, possess or controls such goods if such conduct is carried out "with a view to gain for themselves or another, or with intent to cause loss to another, and without the consent of the [brand owner]”.
The appellants before the Supreme Court attempted, unsuccessfully, to argue that section 92(1) TMA only applied to the sale/distribution of goods where the trademark had been applied without the owner's consent i.e. where the goods were counterfeit and not where they were grey goods.
Private prosecutions present an effective, alternative mechanism for securing justice against those who would seek to take advantage of a brand's trade mark.
Reputation for brand owners is paramount and any trade mark infringements must be taken seriously so that they are not seen as an easy target.
When deployed properly the private prosecution of offenders can send a clear message to trade mark infringers that their conduct will be met with serious consequences.
A private prosecution gives a victim of crime control, far more than in the case of a public prosecution. That can include control over the way in which it chooses to runs its case and how it uses its resources.
At the conclusion of a private prosecution, as long as it has been conducted properly the private prosecutor will not have to pay the defendant's legal costs, irrespective of the outcome. A further significant consideration is that the private prosecutor can apply for his or her own costs (or part of them), even if the defendant has been acquitted.
Penalties and Financial Sanctions
Following a successful conviction, it is open to the judge to pass a sentence of up to 10 years' imprisonment in the Crown Court. This sends a clear message not only that these offences have serious consequences but that the brand owner concerned takes a hard line on trade mark infringement which will be a significant deterrent to others. It should not be forgotten that, subject to any evidential considerations, a prosecution can be brought against anyone involved in the criminal enterprise. This could allow the brand owner the opportunity of potentially shutting down an entire operation.
The court's additional power to order that the defendant pay compensation to the victim for loss or damage arising from their offending is available in a private prosecution in precisely the same way as it would be in a public prosecution.
The recent decision of the Supreme Court should be seen as a welcome reminder of how the criminal justice system can assist brand owners in the fight against a lucrative counterfeit and grey market. For the reasons set out above, private prosecutions provide an effective means of accessing that assistance.