No Longer A Grey Area: Parallel Imports Criminal As Well As Unlawful

A Court of Appeal decision has confirmed that the sale of so-called 'grey goods' can constitute a criminal offence under section 92 of the Trade Marks Act 1994 (the Act).

Background

In R v C and others [2016] EWCA Crim 1617, the appellants' business involved the sale of clothing and shoes bearing the registered trade marks of brands such as Ralph Lauren, Adidas, Fred Perry, Jack Wills and Under Armour. Some of the goods in question were genuine; at some time in their history, they had been manufactured by or with the authority of the trade mark owners. However, the brand owners had not authorised their importation and resale into European Union.

These grey market parallel imports were, as is often the case, mixed up with batches of pure counterfeits i.e. goods the manufacture of which had never been with the brand owners' consent.

In the case of the parallel imports, the Court had found that there were a number of ways by which the goods came to be authorised by the proprietor for manufacture, but not their resale and importation into the EU. Some of them had formed part of an order the proprietor made with an authorised manufacturer which was subsequently cancelled. Others had been manufactured under authority but subsequently rejected as they did not meet the proprietor's quality standards. The rest of the goods were manufactured under authority but in an amount in excess of the requested quantity.

The question for the Court of Appeal was whether the criminal offences under s.92 of the Act applied only to counterfeit goods or whether they also extended to grey market goods. At first instance, the Court had held that s.92 did extend to parallel imports and it was from this decision that the defendants had appealed.

Criminal liability for unauthorised use of trade marks

Under s.92(1)(b) of the Act, it is a criminal offence for a person to sell, hire out or offer for sale or hire, goods bearing a registered trade mark without the consent of the proprietor. It is also an offence to possess such goods in the course of business with a view to selling or hiring them out.

In both instances the accused must be acting with a view to making a gain for himself or to causing a loss to another person. Under indictment, the maximum penalty for the offence is a ten year custodial sentence.

Section 92 of the Act provides a remedy separate from those available for infringement of the exclusive civil rights that the trade mark owners. However, in both...