UK: Counterfeit Goods - Little Tolerance in Future?

Recently, the UK Court of Appeal gave judgment in an appeal with important ramifications for future criminal prosecutions of counterfeiters in the UK.

Overview

The appeal flows from the conviction of a number of individuals for the criminal offence of the unauthorised use of trade marks in relation to goods (under section 92 of the Trade Marks Act 1994). The appellants were involved either in selling bootleg CDs of leading recording artists or counterfeit computer games or clothing under well-known trade marks, such as Sony or Nike.

A number of challenges were raised to the nature of the criminal offence (contained in an otherwise civil statute) and whether it was in conformity with the EC Trade Marks Directive and European Convention on Human Rights. The Court undertook a comprehensive review of both the relevant civil and criminal provisions. It sent a clear message that it would be rare in practice for a defendant to be able to take advantage of the civil law arguments in criminal prosecutions. The Court’s view seems that, whilst these further defences are available to counterfeiters, short shrift will be given to dishonest defendants, seeking to exploit these sophisticated arguments to delay/avoid conviction. Although, the convictions against two of the six defendants were quashed on technical grounds, the Court of Appeal’s analysis makes for a more coherent approach for the future. It is to be welcomed by trade mark owners.

Detail

Lord Justice Tuckey giving judgment took the opportunity to clarify a number of issues for future prosecutions. The detail is summarised below:

• Unless there is a civil infringement of a registered trade mark, there can be no offence under section 92. It was not created to set out a narrower criminal test of mere unauthorised use of a registered trade mark.
• However, the prosecution in the majority of cases need not establish a civil infringement, only that the elements are present: i.e. that there is a registered trade mark; the defendant applied a sign to goods within the scope of the trade mark, with that sign being the same as, or likely to be mistaken for, the trade mark; and it was done without the trade mark owner’s consent.
• The defendant was entitled to raise a defence under the civil sections 10 (use in the course of trade), 11 (permitted references in accordance with honest trade practices) or 12 (permitted parallel imports of genuine goods within the EU) of the Act.
• However, the Court of Appeal was careful to restrict the availability of such defences by indicating that:
  • use in the course of trade had a wide meaning and would include bootlegging and market trading;
  • use of a performer’s name would be trade mark use, since it indicated the origin of the performance and recording;
  • the jury need only consider the defences under s.11, if they were satisfied that the accused had not acted dishonestly;
  • any challenge to the validity of the trade marks by the accused should be launched early in the life of the prosecution; an adjournment of the criminal prosecution could be refused if the challenge to the validity of the trade mark was proceeding slowly or was merely frivolous.
• The general statutory defence under section 92(5) was available to an defendant that believed on reasonable grounds that use of the sign on goods was not an infringement of the registered trade mark. It was not available to a defendant who had not paid any attention to the existence of the trade mark (or was reckless as to its existence), or if he believed (mistakenly) that his was infringing use, but decided nevertheless to proceed. A market trader has an onus to make inquiries and conduct clearance searches, if he is to be able to rely upon this defence with any certainty. The counterfeiter has no refuge from this offence, by merely claiming blind ignorance.
• It was not a breach of Art 6 (right to a fair trial) of the European Convention on Human Rights for the legislation to impose upon the defendant an evidential burden to advance a defence to this offence.
• Section 92 was compatible with the EC Trade Marks Directive (assuming that the defences under s. 11 and 12 were available).
• The maximum penalty of up to 10 years imprisonment was not disproportionate, being in line with similar offences of theft or forgery, involving dishonesty.

"© Herbert Smith 2002

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