“Grey” Goods and the Trade Marks Act 1994

Partner Debbie Brett, in our Corporate and Commercial team, explains, the Court of Appeal has recently confirmed that it is a criminal offence to distribute and sell both grey goods and counterfeit ones under the Trade Marks Act 1994 (the “Act”).

What are “grey” goods?

These are goods that are produced with the trademark owner’s (“Owner’s”) permission and therefore bear a registered trademark, but they are sold without the Owner’s consent. These goods should not be confused with counterfeit goods, which are products made without permission or consent to look like a brand owners product.

An example of a “grey” good are goods that are part of a batch whose manufacture had been authorised by the Owner but which, after manufacture, are rejected as not being of sufficiently high standard, or overruns of production batches.

R v C and Others

The Defendant was a company that sold branded shoes and clothing of well-known brands, such as Ralph Lauren. It was found that the company did sell some counterfeit goods but it was also found that there were a number of goods which were manufactured which had been authorised by the trademark owners but was deposed of without the trademark owner’s permission (grey goods).

The Crown Court found that Defendant was in breach of the Trade Marks Act as s92 provides that a person [or company] commits an offence if it;

• Applies to its goods or packaging, a sign identical to, or likely to be mistaken for, a registered trade mark;
• Sells, hire, offers or distributes goods or packaging which bears such a sign; or
• Has in their possession, custody or control in the course of a business, any such goods with a view to the doing of anything which would be an offence (such as selling or distributing).

The Crown Court confirmed that to commit the offence, the act knowingly as the Defendant must have done it:

• with a view to gain for himself or another, or
• with intent to cause loss to another , and
• without the consent of the trade mark owner

The Defendant appealed, but the Court of Appeal dismissed its appeal and held that “grey goods” shall be widely interpreted” and counterfeit goods should be included in that. The rationale, explained the Court, is that sale of an unauthorised branded item can dupe a customer into purchasing that product  and that this may ultimately diminish the value of the trade mark.

What Does This Means for Online (re)Sellers?

It means that small companies will have to take more precautions when selling branded goods to ensure that they have permission to sell them, or risk criminal prosecution under trade mark law.  To give an example: If a person buys a branded top from a shop in the US (where the manufacturer intended it to be sold) and sells it on an auction website in the UK (where the manufacturer did not intend for it to be sold), he could be subject to criminal liability under s.92 of the Trade Marks Act. This could mean that thousands of marketplace sellers online could face criminal prosecution for selling goods that are not easily available or are hard to source in the UK – even if those goods are ‘second hand’.

How does this decision affect trademark owners?

The decision shows that that the Court is willing to provide protection for trade mark owners by prohibiting the unauthorised sale of “grey” goods and permitting them to define the markets where they want to sell and the retail environments they sell to.

What does this case mean?

It underlines that trademarks are valuable IP and also allows trade mark owners to bring not only civil cases but criminal cases under s.92 of the Act, which can bring a prison sentence of up to 10 years. When it comes to grey goods the law is black and white.

For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.