UK Supreme Court: Grey market sales can be criminal offence

While it is widely recognised that the sale of counterfeit goods is a criminal office, it has previously been established that the sale of grey goods was not criminal. Until now.

Counterfeit goods are those manufactured and sold without the trade mark owner’s permission. These are normally of substandard quality and sold at a reduced price from the genuine article.

Grey goods however, are those that are created with the trade mark owner’s permission but are sold outside of any agreement made and are therefore sold without authorisation.

After a case in which both counterfeit goods and grey goods of well recognised brands were being imported and sold in bulk, the UK Supreme Court was asked to consider whether the sale of grey goods connected with the sale of counterfeit goods can be a criminal trade mark offence.

The Supreme Court considered the facts and handed down their decision is case referenced R v M & Ors [2017] UKSC 58.

The focus was the wording of Section 92 (1) of the Trade Marks Act 1994 which outlines the criminal offence.

Before moving the case to the Supreme Court for consideration, it was of Lord Hughes opinion that ‘such a sign’ contained in subsection 1 (b) of section 92 refers directly back to subsection 1 (a). Subsection 1 (a) relates to goods manufactured and sold without permission of the trade mark owner and therefore could not cover the sale of grey goods.

This opinion was deemed incorrect by the Supreme Court who held that while they agree that subsection(b) does refer back to (a), this reference does not include the wording in section 92 just before (a) which refers to unauthorised goods. ‘Such a sign’ in subsection (b) only linked to (a) in respect to the description of a sign, being “identical to, or likely to be mistaken for, a registered trade mark”.

Therefore, the offences in section 92 are not cumulative and the sale of grey goods would be an offence under section 92 (1)(b).

The Supreme Court therefore referred the matter for a criminal trial.

This is an important ruling and it will be interesting to see if it has any effect in preventing the sale of grey goods across Europe. The big brands who are those effected by the sale of grey goods will be happy at the prospect of having the ability to take action.

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