The Supreme Court has given a boost to brand owners by confirming that selling ’grey market’ goods can attract criminal penalties under UK trade mark law.

In a decision handed down on 3 August, the court unanimously rejected claims that the sale of grey market goods only provides for a claim for civil liability. Grey market goods are products that trade mark holders authorise third parties to manufacture but not sell.

The case, R v M & Ors, centred on an unnamed business in dispute over the alleged bulk importation and sale of clothes bearing trade marks belonging to famous brands including Ralph Lauren, Jack Wills and Adidas.

Some of the clothes imported were counterfeit and some were grey market. The brand owners had authorised the production of the grey market goods but had not authorised their sale.

The court had to decide whether criminal liability arose in relation to the sale of the counterfeit items only, which the appellants claimed, or both the counterfeit and grey market goods.

The appellants argued that a criminal offence could not be applied to grey goods because the manufacturer had given permission for their manufacture and so they [the appellants] should not be held liable for the sale of the goods. However, both the trial judge at the Crown Court and the Court of Appeal rejected those claims.

Upholding the Court of Appeal’s ruling, the Supreme Court said that the appellant’s claim was not the correct interpretation of the law and that each offence listed under the act is ‘separate’ and ‘not cumulative’.

Giving the lead judgment, Lord Hughes wrote that there was no reason to ‘strain the language [of section 92 of the Trade Marks Act] so as to exclude the sale of grey market goods’.

Hughes added: ‘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.’

Emily Swithenbank, senior associate at Pinsent Masons, said in a blog post that the ruling was positive for brand owners.

‘Trade mark infringement is typically seen as a matter for recourse through the civil courts unless the acts complained of fall squarely within the remit of counterfeit goods,’ she said.

‘However, this decision of the Supreme Court confirms and highlights to brand owners that the criminal offence extends to so-called ‘grey goods’. This gives brand owners another weapon in their arsenal and the fear of loss of liberty may make those dealing in grey goods at the darker end of the scale think twice.’