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Grey market goods prove to be black and white

Last week, the Supreme Court handed down judgment in interlocutory proceedings concerning s.92 of the Trade Marks Act 1994 ("TMA") in R v M, C and T [2017] UKSC 58. The case concerns the criminal offence of unauthorised use of trade marks. The Supreme Court was clear that it is unlawful to put grey market goods on the market, just as it is for counterfeit goods.

Last week, the Supreme Court handed down its judgment in interlocutory proceedings concerning the construction of section 92(1) of the Trade Marks Act 1994 ("TMA") in R v M, C and T  [2017] UKSC 58.  The case concerns the criminal offence of unauthorised use of trade marks.  See our previous blog covering the decision of the Court of Appeal Criminal Division here.

The law

Under section 92(1) TMA, 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).

Background

The defendant appellants were charged with the sale and distribution of two categories of goods: (1) counterfeit goods and (2) grey market goods. "Grey market" goods are those which the trade mark proprietor originally authorised to be manufactured, making them authentic, but which were not authorised for sale.  Authorisation for sale may be withheld for various reasons - garments may be deliberately manufactured in excess of those needed, resulting in spares, or goods may have been cancelled by the trade mark proprietor due to limited demand or lack of satisfactory quality.

In order for there to be a criminal offence of unauthorised use of a trade mark, there must be infringement of that mark under civil law (rather than criminal law). The sale or possession of counterfeit or grey market goods would amount to trade mark infringement.

The defendant appellants' case was that only counterfeit goods triggered criminal liability. More specifically, grey market goods fell outside s.92 TMA because their manufacture and, therefore, the original application of the trade mark was authorised by the trade mark proprietor.  As the trade mark was originally affixed to the goods with the proprietor's consent, the sale of those goods would fall outside the ambit of section 92(1)(b) TMA because the wording "such a sign" within that sub-section plainly referred back to sub-section (a) (the application of the trade mark).  If no offence was committed under sub-section (a), grey market goods were not caught by subsection (b) (offering the goods for sale).

Supreme Court decision

Lord Hughes, with whom Lord Neuberger, Lord Mance, Lord Sumption and Lord Hughes agreed, accepted that section (b), which covers the sale of such goods, plainly cross referred back to sub-section (a). However, where the defendants placed emphasis on the application of the trade mark "without the consent of the proprietor", as set out in the statutory wording preceding sub-section (a), sub-section (a) itself makes it an offence to use "a sign which is identical to or likely to be mistaken for a registered trade mark".  Grey market goods were, therefore, clearly caught by sub-section (a) and, subsequently, within the ambit of sub-section (b).

Furthermore, the mental element of "with a view to gain or the intent to cause loss" was applicable to each category of acts under sub-sections (a), (b) and (c), as was the lack of consent from the trade mark proprietor. As such, whilst the "application" of the trade mark under (a) was lawful, the lack of consent from the proprietor to the sale of grey market goods meant an offence was committed where the mental element of the offence was satisfied.  The defendant appellants' reading of the statutory wording was artificial and sought to ring-fence the absence of proprietor consent to sub-section (a) only.

The Statute was sufficiently clear that the Supreme Court did not need to consider the Parliamentary debate which lead to the enactment of s.92 TMA, pursuant to the rule laid down in Pepper v Hart [1993] AC 593.  There was no evidence that Parliament intended to distinguish the treatment of counterfeit goods from grey market goods.  In conclusion, the defendant appellants were criminally liable for the sale of grey market goods.

Comment

The Supreme Court was clear that it is unlawful to put grey market goods on the market, just as it is for counterfeit goods. Both practices involve deception of the public and grey market goods may even prove defective, raising the public interest in consumer safety.  There is also the interest of the trade mark proprietor in controlling goods, which were not authorised to be sold, from entering the market.

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