Can selling goods bearing a genuine trade mark amount to a criminal offence? M, C and T argued that only a counterfeit mark could engage section 92 of the Trade Marks Act 1994. The Supreme Court held that consent to applying the mark and consent to selling the marked goods were separate questions.
This was an appeal on a point of law before any trial. The appellants, a limited company and two individuals connected with its management, were charged with unauthorised use of trade marks contrary to section 92(1)(b) and (c) of the Trade Marks Act 1994. No facts had been found. The Crown alleged that they imported in bulk, and then sold, goods such as clothes and shoes made outside the European Union and bearing signs which appeared to be the trade marks of well-known brands.
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Some of those goods were said to have been made by people who were neither the trade mark proprietor nor authorised by the proprietor. The appellants called these true counterfeits. A significant part of the remainder were said to have been made under an original authorisation, whether by subcontract, licence or otherwise, but sold with the mark still attached and without the proprietor’s consent. The suggested reasons varied: deliberate production beyond the permitted quantity, surplus made without an original plan to sell it independently, or manufacture under a permission later cancelled, including where the proprietor was unhappy with the quality. The appellants called these grey-market goods. Neither the indictment nor the Crown’s case separated the two categories.
The argument
Two points were common ground. First, following R v Johnstone, there can be no criminal offence of unauthorised use of a trade mark unless there is also a civil infringement. Secondly, selling any of these goods, or possessing them in the course of trade, would be a civil infringement. The appellants nevertheless said that a crime arose only in the case of true counterfeits. Goods to which the mark had first been applied with consent were, they argued, outside section 92 even though the proprietor had not consented to the sale.
Section 92(1) says that 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, does one of three things. Paragraph (a) covers applying to goods or their packaging a sign identical to, or likely to be mistaken for, a registered trade mark. Paragraph (b) covers selling, letting for hire, offering or exposing for sale or hire, or distributing goods which bear, or whose packaging bears, “such a sign”. Paragraph (c) covers having such goods in one’s possession, custody or control in the course of a business with a view to doing something which would be an offence under (b). Subsection (5) gives a defence where the defendant shows a reasonable belief that the use of the sign was not an infringement.
The appellants’ argument depended on “such a sign” in paragraph (b). They said that those words refer back to paragraph (a), and therefore apply only where the mark itself was applied without the proprietor’s consent. Grey-market goods, on their case, had received the mark with consent; only the later sale was unauthorised.
The court’s reading
Lord Hughes, with whom Lord Neuberger, Lord Mance, Lord Sumption and Lord Hodge agreed, accepted that “such a sign” refers back to paragraph (a). It does not also carry in the opening words “without the consent of the proprietor”, or a requirement that the sign was applied without consent. What it imports is the description of the sign in paragraph (a): a sign “identical to, or likely to be mistaken for, a registered trade mark”. The signs said to appear on the grey-market goods were within that description.
The three paragraphs create separate offences, not a sequence in which one must be committed before the next. The same mental element, and the same requirement that the use of the sign is without the proprietor’s consent, apply to each. Paragraph (a) concerns applying the mark. Paragraph (b) concerns selling or otherwise dealing in goods which bear such a mark, without consent and with the required mental element. Paragraph (c) is a preparatory possession offence, looking forward to conduct which would offend paragraph (b); that conduct need not already have occurred. One person may commit all three, or different people may commit them, but none of that is required. The appellants’ reading, which would treat the sign in paragraph (b) as one “so applied” without consent, was strained and unnatural.
Why the other arguments failed
The language was neither ambiguous nor absurd, so there was no basis, under Pepper v Hart, for examining what had been said in Parliament. The appellants did not suggest that a minister had clearly identified the Bill as limited to one category of goods. References to punishing counterfeiting did not show that Parliament had considered, or rejected, criminal liability for grey-market goods.
The Court distinguished exhaustion of trade mark rights. Under the rules applicable in 2017, once a proprietor voluntarily put marked goods on the European single market, further sale would generally involve no civil infringement and hence no section 92 offence. That did not answer the question about goods sold without the proprietor’s consent here.
The predecessor, section 58A of the Trade Marks Act 1938, required a stricter mental element. Even so, its selling offence would still have covered goods sold without authority to sell, whether or not the original application of the mark had been permitted. The later change in the order of the words was grammatical, not a narrowing of the offence.
Proof could be difficult whichever interpretation the Court adopted. The judges saw no reason to exclude all goods originally marked with consent. A purchaser might, for example, be misled by a branded item that had failed quality checks. The prosecution still had to establish the elements of the offence charged.
The human-rights argument
In the alternative, the appellants said that the Crown’s construction disproportionately interfered with Article 1 of Protocol 1 to the European Convention on Human Rights. Lord Hughes accepted that a criminal sanction might be disproportionate even where a civil one is not. People in the defendants’ position nevertheless have no proprietary right in the trade marks. They do have rights in goods they have bought, but the Act does not prevent them from selling those goods except while the misleading and infringing mark remains attached. It regulates the use or manner of disposal of the goods in the general interest, including the protection of trade marks, rather than depriving them of property. It was not disproportionate to penalise sales made while that mark is still attached, or to impose a criminal sanction on people who might otherwise decide that the risk of a damages claim is worth taking.
Verdict: The Supreme Court unanimously dismissed the three appeals. The trial could proceed on the basis that unauthorised sale, or possession for such sale in the course of business, could fall within section 92. The Court made no finding of guilt.
Source: R v M, C and T [2017] UKSC 58
