[2017] UKSC 58
On appeal from: [2016] EWCA Crim 1617
JUDGMENT
R v M
R v C
R v T
before
Lord Neuberger, President
Lord Mance
Lord Sumption
Lord Hughes
Lord Hodge
JUDGMENT GIVEN ON
3 August 2017
Heard on 19 June 2017
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Appellant (M)
Henry Blaxland QC
Edward Henry
(Instructed by
Stokoe Partnership Solicitors)
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Respondent
Julian Christopher
QC
Brian Nicholson
Joel Smith
(Instructed by CPS
Specialist Fraud Division)
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Appellants (C
and T)
Michael Bromley Martin QC
Simon Baker
(Instructed by
Stokoe Partnership Solicitors)
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LORD HUGHES: (with whom
Lord Neuberger, Lord Mance, Lord Sumption and Lord Hodge agree)
1.
This is an interlocutory appeal in a criminal case which concerns the
correct construction of section 92(1) of the Trade Marks Act 1994 (“the 1994
Act”).
2.
The appellants are a limited company and two individuals connected with
its management. They are indicted for, inter alia, offences of unauthorised use
of trade marks, contrary to section 92(1)(b) and (c) of the 1994 Act. No trial
has yet been held, and the Crown case remains at this point a matter merely of
allegation, which may or may not be proved. At a preparatory hearing in the
Crown Court, they advanced a submission that part of what was alleged was, on
any view, outside the terms of section 92 and no offence. Both the trial judge
and the Court of Appeal (Criminal Division) rejected that submission. They
renew it in this court.
3.
What is alleged is that the defendants are engaged in the bulk
importation and subsequent sale of goods such as clothes and shoes. The goods,
or many of them, are said to bear what appear to be the trade marks of
well-known brands, such as Ralph Lauren, Adidas, Under Armour, Jack Wills, Fred
Perry or similar. The goods were manufactured abroad, in countries outside the
EU.
4.
Some of the goods in the possession of the defendants are said to have
been manufactured by people who were neither the trade mark proprietor, nor
authorised by the proprietor to make them. This first category of goods, the
appellants describe as counterfeits in the true sense.
5.
A significant portion of the remainder of the goods are, however, ones
where there had originally been an authorisation of manufacture by the
registered trade mark holder, whether by subcontract, licence or otherwise, but
whose sale had not been authorised by him. They were thus sold, bearing the
trade mark, without the consent of the owner of the mark. The causes of the
non-authorisation of sale might be, it is said, various. Some garments might
deliberately have been made by the factories in excess of the numbers permitted
by the trade mark owner, so that the balance could be sold for their own
benefit. Some might have been made in excess of the order without that original
ulterior intention (indeed perhaps as precautionary spare capacity planned and
approved by the trade mark owner), but then have been put on the market without
his consent. Some might have been made under a permission which was cancelled
by the trade mark owner; that in turn might include cases where the trade mark
owner was dissatisfied with the quality and not prepared to have the goods put
on the market as if their own, but cancellation might not be limited to that
cause. Those are not exhaustive of the possibilities. These latter various
types of goods are described by the appellants as goods appearing on the “grey
market”.
6.
It is common ground that neither the indictment nor the way the Crown puts
its case distinguishes between these various different provenances. That led to
submissions that the indictment would turn out either to be bad for duplicity
or to be misleading, and at risk of producing verdicts which it was difficult
to interpret. Thus was the point now at issue identified.
7.
In short, it is common ground that:
(i)
before there can be a criminal offence of unauthorised use of a trade mark
there must be an infringement of that mark which would be unlawful as a matter
of civil law; see R v Johnstone [2003] UKHL 28; [2003] 1 WLR 1736; and
(ii)
the sale, or the possession in the course of trade, of goods of any
of the various provenances set out in para 5 above, would amount to an
infringement of trade marks, giving rise to civil liability.
But the appellants’ case is that whilst any of the
various provenances set out would involve civil liability, it is only in the
case of what they describe as true counterfeits that there is any criminal
offence. They say that goods which were originally manufactured with the
permission of the trade mark proprietor, but which are ones where he has not
authorised the sale, are not true counterfeits and are not within the statute.
Section 92(1) does not apply, they contend, to goods put on the grey market.
8.
The resolution of this contention depends on the true construction of
section 92(1) of the 1994 Act. It says:
“92.- (1) 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 -
(a) applies to goods or
their packaging a sign identical to, or likely to be mistaken for, a registered
trade mark, or
(b) sells or lets for hire,
offers or exposes for sale or hire or distributes goods which bear, or the
packaging of which bears, such a sign, or
(c) has in his possession,
custody or control in the course of a business any such goods with a view to
the doing of anything, by himself or another, which would be an offence under paragraph
(b).”
Subsection 92(5) adds a reverse onus statutory defence:
“(5) It
is a defence for a person charged with an offence under this section to show
that he believed on reasonable grounds that the use of the sign in the manner
in which it was used, or was to be used, was not an infringement of the registered
trade mark.”
9.
The appellants’ contention focuses on the use of the expression “such a
sign” in subsection (1)(b). That refers back, they say, to subsection (1)(a).
And by referring back to (1)(a), they say, it means that (b) applies only to
goods where the relevant sign (ie trade mark) has been applied without the
consent of the proprietor. Any goods in the “grey market” category have had the
trade mark originally applied with the consent of the proprietor. It is only
the sale which the proprietor has not authorised. Therefore, they say, those
goods are not ones to which paragraph (a) of the subsection could apply. It
follows, they contend, that they are not, when it comes to paragraph (b), goods
which bear “such a sign”.
10.
It may readily be agreed that the expression “such a sign” in section
92(1)(b) refers back to the sign described in the immediately preceding
paragraph (a). The difficulty comes when one is asked to read “such a sign” as
incorporating the words “without the consent of the proprietor” which appear in
the first few lines of the section before (a), and also the requirement
that the sign has been applied to the goods (without such consent), which is
the central component of the offence under (a). This is simply not a possible
construction of section 92(1). There is no difficulty, on the ordinary reading
of paragraphs (a) and (b), in seeing what the reference back to “such a sign”
in (b) imports from (a). “Such a sign” in (b) plainly means a sign such as is
described in (a). The sign described in (a) is a sign which is “identical to,
or likely to be mistaken for, a registered trade mark”. Signs (or trade marks)
having any of the provenances described in para 5 above are squarely within
this description. So-called grey market goods are caught by the expression.
11.
The offences set out in paragraphs (a), (b) and (c) of section 92 are,
as a matter of plain reading, not cumulative, but separate. It is not necessary
that one has been committed (by someone) before one can say that the next in
line has been. The mental element of a view to gain or the intent to cause loss
is applicable to all three. So is the element that the use made of the sign is
without the consent of its proprietor. Paragraph (a) then makes it an offence
to apply such a mark, without consent and with the relevant mental element.
Paragraph (b) makes it an offence to sell (etc) goods with such a mark, without
the consent of the proprietor and with the necessary mental element. Paragraph
(c) does the same for the preparatory offence of possession in the course of
business with a view to behaviour which would be an offence under (b), again
without the consent of the proprietor and with the relevant mental element.
Subparagraph (c) thus involves anticipation (but not necessarily the commission)
of an offence under (b). Of course, a person may commit all three offences, or
different people may commit all three between them. But that is not necessary.
Each stands alone.
12.
The appellants’ reading of paragraph (b) is, by contrast, strained and
unnatural. It does not simply reach back to (a) but to the general words of the
section which precede it. It requires one to read “sign” in (a), which is
incorporated into (b), as “which bears a sign, so applied”, or at least as
“such a sign, so applied”.
13.
This being so, there is no ambiguity or obscurity in the language such
as would justify the court, pursuant to Pepper v Hart [1993] AC 593, in
investigating the contents of Parliamentary debate at the time of the passage
of the Bill which became the 1994 Act. Nor can it be suggested that the
ordinary (or literal) reading of the Act gives rise to absurdity. It should be
recorded, moreover, that the appellants realistically did not contend that
there had been the kind of clear ministerial statement which amounted to a
definitive identification of what the Bill was intended to achieve. The most
that is contended for is that the passage of the Bill was marked by several
references to the desirability of punishing counterfeiting. No doubt it was.
But there is not suggested to be any point at which Parliament, or any
individual speaker, confronted the suggested difference between fake goods
(which the appellants here describe as true counterfeits) and grey market
goods. Still less is there any point at which it can be suggested that
Parliament plainly confined itself to criminalising fake goods and abjured the
criminalising of grey market goods.
14.
In support of their contention that such a distinction was plainly
intended, the appellants referred to observations made by Lord Nicholls and
Lord Walker in R v Johnstone upon the differences between counterfeit
goods, pirated goods, and bootlegged goods. Those observations arose, however,
in the context of the case in which they were spoken. The defendant was charged
with offences against section 92(1)(c). The offences were said to have arisen out
of his possession for sale of compilation compact discs comprising songs which
had covertly been recorded at concerts given by well-known artistes. The
compact discs referred to the artistes by name, track by track, and the artiste
had in each case registered his name as a trade mark. The issue was whether the
use of the name was, in the particular circumstances, one which might be taken
by the buying public as an indication of authorised origin of the disc, as
distinct from identifying the singer. That was a question of fact, but unless
it was demonstrated that the use of the name would be taken as an indication of
origin, there would be no civil liability for trade mark infringement, and the
decision of the House was that in that event there could be no criminal
liability either. It was in that context that Lord Nicholls referred at
paragraph 1 to counterfeit goods as “cheap imitations of the authentic
article”; that was said to distinguish that case from pirated music, which is
music marketed without any trade mark, although recorded from a trade marked
disc, and from bootlegged music, which is what Mr Johnstone had. Likewise, Lord
Walker, at para 59, referred to counterfeiting as an expression “generally used
to include unauthorised sale, under a well-known trade mark, of goods not made or
authorised by the proprietor”. Neither of their Lordships was addressing what
is here said to be the critical difference between fake goods and unauthorised
goods on the grey market. Their observations came, moreover, years after the
passage of the 1994 Act, and could not have been in mind at the time of its
passing.
15.
The appellants are correct that, in the context of goods which a
proprietor voluntarily puts into the European single market with his trade mark
attached, section 12 of the 1994 Act, transposing article 7 of Directive 89/104/EEC,
has the effect that further objection to the use of the mark is limited to
special cases, such as changes or impairments to the goods. But that is true
whichever of the rival constructions of section 92 is correct. Where it
applies, this concept of exhaustion means that there is no infringement of the
mark as a matter of civil law, and thus no criminal offence. But this sheds no
light on the correct construction of section 92.
16.
The appellants further drew attention to the wording of the predecessor
of section 92, section 58A of the Trade Marks Act 1938. This had provided:
“58A.(l) It is an offence, subject
to subsection (3) below, for a person -
(a) to apply a mark
identical to or nearly resembling a registered trade mark to goods, or to
material used or intended to be used for labelling, packaging or advertising
goods, or
(b) to sell, let for hire,
or offer or expose for sale or hire, or distribute -
(i) goods bearing such a
mark, or
(ii) material bearing such
a mark which is used or intended to be used for labelling, packaging or
advertising goods, or
(c) to use material bearing
such a mark in the course of a business for labelling, packaging or advertising
goods, or
(d) to possess in the
course of a business goods or material bearing such a mark with a view to doing
any of the things mentioned in paragraphs (a) to (c),
when he is not entitled to use the
mark in relation to the goods in question and the goods are not connected in
the course of trade with a person who is so entitled.
…
(3) A person commits an
offence under subsection (1) or (2) only if -
(a) he acts with a view to
gain for himself or another, or with intent to cause loss to another, and
(b) he intends that the
goods in question should be accepted as connected in the course of trade with a
person entitled to use the mark in question;
and it is a defence for a person
charged with an offence under subsection (1) to show that he believed on
reasonable grounds that he was entitled to use the mark in relation to the
goods in question.”
17.
This section provided, in subsection (3), for a more stringent test of
mental element than does the present section 92. The appellants invite us to
conclude that the earlier, more stringent, mental element may have had the
practical effect of confining criminal liability to cases of their category of
“true counterfeits”, and they say that a change in that effect is not
demonstrated to have been intended by the 1994 Act. The difficulty with that is
that whilst it is certainly true that the mental element was more stringent,
the 1938 Act would still have caught so-called grey market goods, for paragraph
(1)(b) clearly applied to goods which were sold when sale was unauthorised,
whether or not the original application of the mark had been permitted.
Moreover, it is noticeable that the construction now contended for of section
92(1)(b) could not have been applied to section 58A(1)(b) without considerable
difficulty, for the words giving effect to the element of absence of consent of
the trademark proprietor did not appear at the beginning of the section as they
now do, but only at the end; hence it would have been even more problematical
to suggest that “such a mark” imported them. It is plain enough that the
inversion of the order of the words was a grammatical rather than a substantive
variation.
18.
Nor is there any reason to strain the language of section 92(1)(b) so as
to exclude the sale of “grey market” goods. That is not because of the
consequentialist arguments pressed on us by the Crown. It is doubtful that
(absurdities or impossibilities apart) difficulties in assembling evidence can
ordinarily affect the construction of a criminal statute. Moreover, some of the
supposedly adverse consequences of such a construction which were put before us
on behalf of the Crown would be as likely to ensue even on the correct
interpretation of the Act set out above. The possible difficulty of
distinguishing, where there has been an overrun, between the goods marketed
with the proprietor’s authority and those which were a backdoor venture on the
part of the manufacturer and subsellers, might as well arise on both
constructions; no doubt in many cases the circumstances of the exit from the
factory and of the subsequent sales will often be telling. Likewise it is far
from clear that there will be greater difficulty occasioned by the appellants’
suggested construction than by the correct one in the case of convincing fakes.
In both cases the defendant may occasionally be in a position to assert that he
was taken in and thus reasonably believed that no infringement was involved. Such
a defence, if advanced, must be met on its merits, which will no doubt involve
investigation of, inter alia, the circumstances in which the defendant acquired
the goods and the inquiries which he did or did not make. But, these
consequentialist arguments apart, it is, on any view, unlawful for a person in
the position of the defendants to put grey goods on the market just as it is to
put fake ones there. Both may involve deception of the buying public; the grey
market goods may be such because they are defective. The distinction between
the two categories is by no means cut and dried. But both are, in any event,
clear infringements of the rights of the trade mark proprietor. Defendants who
set out to buy up grey market goods to make a profit on re-sale do so because
the object is to cash in on someone else’s trade mark. If such be proved, they
have scant claim to a beneficent construction of the Act. As it is, its
ordinary reading plainly means that, unless they have the statutory defence,
they have committed an offence.
19.
In the alternative, the appellants contend that the Crown’s construction
of section 92(1) involves a disproportionate breach of their rights under article
1, Protocol 1 to the European Convention on Human Rights. It may be accepted
that it is perfectly possible that the imposition of a criminal sanction might
be disproportionate where a civil law sanction is not. But persons in the
position of these defendants have no proprietary right in the trade marks. They
do have a right in the goods which they have bought, but the 1994 Act does not
stop them selling them, except if they wish to do so whilst still with the
misleading and infringing trade mark attached. The 1994 Act does not,
therefore, deprive the defendants of any property which they have. The most it
does is to regulate their use or the manner of their disposal of the goods,
which is permitted under the second paragraph of article 1 in the general
interest, which must include a general interest in the protection of trade marks.
There is in any event nothing disproportionate in the 1994 Act penalising sales
when the infringing trade mark is still attached, nor in imposing a criminal
sanction on those who might otherwise calculate that the risk of liability in
damages is worth taking. That is a perfectly legitimate balance to draw between
the rights of the proprietor to protect his valuable trademark and goodwill,
and those of the person who wishes to sell goods which he has bought.
20.
For these several reasons, these appeals must be dismissed and the trial
may proceed accordingly.
