Court of Appeal confirms sale of “grey” goods is a criminal offence

Judgment adds another string to the bow of manufacturers and rights holders seeking to protect their rights.

Late last year the Court of Appeal held that the sale of “grey” goods could be a criminal offence. Before this decision, it was unclear whether the sale of grey goods would be met with the same treatment as counterfeit goods.

“What are grey goods?” we hear you ask. Well, grey goods are goods that are legitimately created and bear an owner’s registered trademark (with the owner’s consent) but are subsequently sold or distributed without the owner’s consent. They differ from counterfeit goods which are essentially fake goods that bear a trademark without the legitimate owner’s consent.

The judgement provides further protection to brand owners seeking to protect their brand and the sale of their products, however, the court recognised that the offence can be difficult to prove.

The case involved the unlawful sale of branded goods manufactured outside of the UK. Even though the goods were manufactured by authorised factories, they were subsequently sold without the brand owner’s authority. The goods allegedly derived from cancelled orders of substandard and excess products.

The issue for the court to decide upon was whether the sale of grey goods merited the same criminal implications under s92 of the Trade Marks Act 1994 as counterfeit goods. The court dismissed the arguments of the appellant and held that the sale of grey goods could create criminal liability because the wording of the act unambiguously applies to goods or packaging that bear a sign, whether or not applied to the goods by the defendant.

In its judgment, the court highlighted the difficulty prosecutors would have in bringing a case for criminal liability as they would need to prove their case ‘beyond reasonable doubt’ (the criminal standard) as well as satisfying the mental element of proving the defendant acted with a view to gain and an intention to cause loss to another.

Interestingly, the court expressly confirmed that its decision does not apply to parallel imports.