Trade Mark Law Update: Grey Market Goods

In good news for brand owners, the Supreme Court has decided that the distribution of grey market goods without the consent of the brand owner is a criminal offence.

So called grey market goods, also referred to as parallel imports, are goods which have been manufactured by or with the consent of the brand owner but sold without the brand owner’s consent – in other words, they are authentic products sold by unlicensed resellers. For example, Gucci might manufacture particular styles of watch for sale only in the US. If a third party buys these watches and sells them in the UK without Gucci’s consent, the watches will be “grey” goods. They are distinct from counterfeit goods, which are simply fakes.

Brand owners have long been able to enforce their trade mark rights in the civil courts with respect to counterfeit goods and grey market goods. It is also established law that dealing in counterfeit products is a criminal offence.

In the recent case of R v M & Ors [2017] UKSC 58, the Supreme Court was asked to decide whether dealing in grey market goods is also a criminal offence.

The defendants were alleged to have been involved in the bulk importation and subsequent sale of goods such as clothes and shoes. The goods, or many of them, were said to have borne the trade marks of well-known brands such as Ralph Lauren, Adidas, Under Armour, Jack Wills and Fred Perry. The goods were manufactured abroad, in countries outside the EU. Some of the goods were said to have been counterfeit goods and some were said to have been grey market goods.

The claimants acknowledged that criminal liability arose in relation to the sale of the counterfeit items, but argued that it did not arise in relation to grey market goods. It all turned upon an interpretation of the first part of section 92 of the Trade Marks Act 1994, which reads:

“(1) 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…”

The claimants argued that the expression “such a sign” in subsection (1)(b) referred back to subsection (1)(a). Therefore, subsection (1)(b) would only apply to goods where the relevant sign (i.e. the trade mark) had been applied without the consent of the proprietor. Grey market goods, said the claimants, concerned unauthorised sales (not the unauthorised application of trade marks). Accordingly grey market goods did not fall within section 92.

The Court disagreed, upholding the Court of Appeal’s decision. The offences set out in section 92 were not cumulative, but separate offences, and there was no reason to “strain the language of section 92(1)(b) so as to exclude the sale of “grey market” goods”. Defendants who set out to buy grey market goods to make a profit on re-sale did so because the object was to cash in on someone else’s trade mark, said the Court. If proved, they had “scant claim to a beneficent construction of the Act” and unless they had a defence, they would have committed an offence.

For these reasons, the court dismissed the claimant’s case and ordered a criminal trial to proceed.

The grey market is a huge problem for brand owners, as consumers can benefit from substantial discounts on authentic products purchased from parallel importers at their expense. This Supreme Court decision is therefore a welcome one for brand owners, providing them with another tool with which to protect their intellectual property.