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‘Grey Market’ in Trademarked Goods Is Illegal, Supreme Court Rules

The so-called ‘grey market’ in genuine branded goods, the sale of which is prohibited by trade mark proprietors for quality control or other reasons, is just as illegal as trading in counterfeits, the Supreme Court has ruled in an important test case.

The case concerned the pending prosecution of three traders who were alleged to have engaged in the bulk import and sale of trademarked goods that had been manufactured outside the EU. They were said to have breached Section 92(1) of the Trade Marks Act 1994, which bans the sale for profit of goods to which a sign has been applied that is identical to, or is likely to be mistaken for, a registered trade mark without the consent of the trade mark proprietor.

A significant proportion of the goods concerned had been manufactured, and had had a trade mark applied to them, with the permission of the proprietors. They were, however, alleged to be part of the grey market in that their sale was not authorised by the proprietors, for example because they were not of sufficiently high quality.

At a preliminary hearing, the traders argued that, although the sale of grey goods attracts civil liability, it does not fall within the criminal offence enacted by Section 92(1). Arguments that the provision only applies to ‘true counterfeits’ were, however, rejected by the Crown Court and the Court of Appeal.

In dismissing the traders’ appeal, the Supreme Court found that their arguments were contrary to a plain reading of Section 92(1). There was no ambiguity in the provision, nor was there any evidence that Parliament had intended to criminalise outright fakes but not grey goods. The clear meaning of Section 92(1) was that it was equally unlawful to sell grey goods and counterfeits. In both instances, traders were setting out to profit from someone else’s trade mark without permission.