The case of R v C & Ors dealt with a limited liability company that sold shoes and clothing, the operation of which included several different defendants. In the course of their business, the defendants sold branded goods, such as Ralph Lauren, Adidas and Under Armor, attained from sources outside of the EU, both from factories that were and were not authorized by the original rightsholder (and subsequently sold without their authorization in both instances). The goods sold included "...goods which had been part of an order placed with an authorised manufacturer by the trade mark proprietor but then cancelled; goods part of a batch whose manufacture had been authorised but which, after manufacture, were rejected as not being of sufficient standard; or goods manufactured, pursuant to an order, with authority but in excess of the required amount" (none of the categories had been confirmed by the prosecution). None of the goods sold were a part of any authorized batches of produced goods or parallel imports. The parties were taken to court for the contravention of section 92 of the Trade Marks Act 1994.
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The defense tried to separate the application of the mark by an authorized licensee on the goods from ones where it was done by an unauthorized entity. The Court rejected this position as patently false. According to the Court, the wording in the provision does not support this line of argument. In particular, the Court highlighted the lack of implied consent on the part of the authorizing entity for the brands applied on the goods, especially in the case of 'grey' goods. Their sale was not, through the licensing of the marks, authorized to unauthorized third-parties.
The final argument put forth by the appellants was that of ambiguity, and required clarification on Parliament's intention. The Court swiftly dispatched with the argument, deeming that the language of section 92 was perfectly clear and required no discussion of Parliamentary debates as to its meaning. While the discussions in Parliament were often lacking in detail as to the meaning of a 'counterfeit' (i.e. would it include 'grey' goods), the Court still considered that "...Trade mark violation gravely undermines the value of a brand and affects legitimate trade. The very fact of a cheap sale of a an unauthorised branded item can both dupe a customer and diminish the market and overall value of the trade mark, in terms of perception of quality and exclusivity. In some cases moreover (for example, electrical goods or toys) very real issues of public health and safety can arise where the goods are fake or, even if originally manufactured with the trade mark proprietor's authorisation, are then rejected as sub-standard but nevertheless sold on without authorisation". Due to this potential impact on the brand and public safety, the sale of 'grey' goods would therefore be detrimental in a multitude of ways, and should be protected by criminal sanctions. The Court did concede that the definition of 'grey' goods does potentially raise issues with parallel imports, but discussion on this was kept limited, as it did not apply to the case at hand.
The Court of Appeal ultimately considered that the sale of grey goods could amount to a criminal offense under section 92.
The case is a very important one, especially as a reminder to those who wish to import goods from outside the EU, and don't do their due diligence as to their origin and legitimacy. Businesses would need to be careful and verify that the products sold would be fully authorized, even for sale if bought directly from the factory itself. This writer would hesitate to wager that the case will have major implications to businesses importing branded goods from abroad, since the courts are reluctant to push criminal prosecution, even in parallel importation matters; however, one needs to be careful to dismiss the possibility outright.