The IP legal framework
There are numerous legal options available to tackle counterfeiting and illegal parallel imports, including criminal and civil enforcement. The key legal provisions are summarised below, and the options for enforcing these provisions are covered in separate sections of this guide.
The criminal offences
Counterfeiting and trading in illegal parallel imports can give rise to multiple criminal offences. The key IP offences are often referred to as:
Counterfeiting
Where there is infringement of trade marks under section 92 of the Trade Marks Act 1994 (covered in detail below).
Piracy
Where there is infringement of copyright, related rights and registered designs under sections 107, 198, 296 and/or 297 of the Copyright, Designs & Patents Act 1988 or section 35ZA of the Registered Designs Act 1949.
In this guide, we focus on counterfeiting, although much of what we cover also applies to pirated goods. There is also potential for criminal liability in relation to fraud offences, product safety and liability and consumer protection laws as detailed in tab 9 of this guide.
In this guide, we focus on counterfeiting, although much of what we cover also applies to pirated goods. There is also potential for criminal liability in relation to fraud offences, product safety and liability and consumer protection laws as detailed in tab 9 of this guide.
The trade mark criminal offences
The main relevant trade mark offences are set out in section 92 of the Trade Marks Act 1994.
The offence
It is an offence for a person to use a ‘prohibited sign’ as part of a ‘prohibited act’ with a view to gain for himself or another, or with intent to cause loss to another, and without the consent of the trade mark proprietor.
Prohibited acts
The prohibited acts include:
- applying the sign to goods
- offering to (or actually) selling, letting or distributing goods which bear the sign
- applying the sign to material intended for labelling, packaging or advertising materials
- making an article for making copies of the sign
- various additional acts like having possession, custody or control of any of the aforementioned items in the course of a business (sometimes with a knowledge element).
Prohibited sign
The sign used must be identical to or ‘likely to be mistaken for’ a registered trade mark. This ensures that infringers cannot make minor changes to the trade mark used in order to avoid criminal sanctions. There is no case law on how far the ‘likely to be mistaken for’ wording extends, but something more than just ‘similarity’ is likely to be required.
The goods
The goods on which the infringing sign is used must be those in respect of which the trade mark is registered (unless the trade mark in question has a reputation in the UK and the use of the sign would take unfair advantage of, or be detrimental to, the distinctive character or repute of the mark).
Penalties
The penalties on indictment for an offence under section 92 are imprisonment for up to 10 years, an unlimited fine or both (see the Sentencing Guidelines).
What is not covered
Unregistered trade marks
No offence is committed if the mark in question is not registered in the UK.
Services
Section 92(5) provides a defence where the defendant believed on reasonable grounds that the use of the sign was not (or would not have been) an infringement. The burden is on the defendant to prove this.
Innocent infringement
No offence is committed if the sign is used in relation to services; only use in relation to goods constitutes an offence.
Defences
An offence is only committed if there is an infringement of the trade mark which would be unlawful as a matter of civil law. This means that the civil defences to infringement in section 11 of the Trade Marks Act 1994 also constitute defences under section 92.
The civil wrongs
The key civil wrongs that may be involved in counterfeiting are set out below.
Trade mark infringement
Where a registered trade mark is used without permission on or in relation to counterfeit goods. This is the most usual ‘counterfeiting’ civil claim and is covered in more detail below.
Passing off
Where trade marks (whether registered or not) and other indicia are used in a way that misleads consumers into believing they are genuine, thereby damaging a brand's goodwill. Typically, passing off claims are more difficult and costly to bring than trade mark infringement claims so, in practice, they are used as a ‘fallback’ where there are no relevant registered rights to rely on.
Copyright infringement
If the counterfeit product reproduces or copies any original works protected by copyright (such as photographs used in advertising materials or graphics used on products), there may be a claim for copyright infringement. Relying on copyright infringement is often effective in taking down online advertisements that use the original brand's listing photographs to advertise the counterfeit products.
Design infringement
If the design of the counterfeit product infringes a registered or unregistered design or design right, this could form the basis of a civil claim.
In addition to the above, rights holders may also have civil claims available in relation to fraud, product safety and liability, consumer protection laws and defamation as detailed in tab 9 of this guide.
The trade mark civil wrongs
The relevant provisions are contained in section 10 of the Trade Marks Act 1994.
Infringement
A person infringes a registered trade mark if, in the course of trade, they use:
- Section 10(1): An identical sign on goods/services identical to those for which the trade mark is registered. This is the most common ground in counterfeit cases.
- Section 10(2): An identical or similar sign on goods/services identical or similar to those for which the trade mark is registered such that there is a likelihood of confusion on the part of the public.
- Section 10(3): An identical or similar sign where the registered trade mark has a reputation in the UK and the use of the sign, without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of that mark.
Prohibited acts
Use is not exhaustively defined but is similar to the acts prohibited under the criminal offence – this includes affixing the sign to goods or packaging, offering goods for sale and selling goods under the sign, importing and exporting goods under the sign and using the sign on business papers or in advertising.
Prohibited sign
Depending on the type of infringement, the sign must be identical or similar to the registered mark. The ‘identical’ requirement is narrower than the criminal offence ‘likely to be mistaken for’ requirement, but the ‘similar’ requirement is broader.
The goods/services
The goods on which the infringing sign is used must be identical or similar to those in respect of which the trade mark is registered. However, use on dissimilar goods can also constitute infringement where the trade mark in question has a reputation in the UK and the use of the sign would take unfair advantage of, or be detrimental to, the distinctive character or repute of the mark. There can be infringement where the registered mark is used in relation to both goods and services.
Remedies
The remedies available to rights holders include an injunction to restrain future acts of infringement, damages or an account of profits, an order for delivery up or destruction of the infringing goods and recovery of the majority of their legal costs.
What is not covered
Unregistered trade marks
No infringement is committed if the mark in question is not registered in the UK, although the common-law tort of passing off may provide an alternative form of action.
Defences
Unlike the criminal offence, civil infringement is a ‘strict liability’ offence, so it is not a defence for the defendant to reasonably believe that use of the sign would not be an infringement. There are, however, various defences to infringement – many of which will not apply in counterfeiting scenarios (where the use will generally not be in accordance with ‘honest commercial practices’).
Application to parallel imports
Rights holders can rely on the civil and criminal provisions outlined above to prevent the parallel import of products into the UK.
Rights holders are only prevented from doing so if their rights are ‘exhausted’ under section 12 of the Trade Marks Act 1994 (or equivalent provisions in other IP legislation).
The general rule is that it is permissible to rely on UK IP rights to prevent goods coming into the UK from outside of – but not from within – the UK and the European Economic Area (EEA).
Goods from outside the UK/EEA
Rights holders generally can rely on their UK IP rights to object to the parallel import of goods into the UK where the goods in question were first put on the market under the right outside of the UK and EEA (although the position is slightly different where the IP right in question is a patent).
Goods from within the UK/EEA
Rights holders generally cannot rely on their UK IP rights to object to the parallel import of goods into the UK where those goods were first put on the market under the right in the UK or EEA by the rights holder or with its consent. The IP owner's rights are exhausted.
Even where rights are exhausted, there is still scope for rights holders to object to the import or circulation of goods within the UK where there is:
- No consent: If the rights holder has not consented to those particular goods being put on the market under the right in question (in the UK or EEA).
- Legitimate reasons: If legitimate reasons exist for the rights holder to oppose the further commercialisation of the goods in question (eg because there has been a change to the quality or packaging of the goods). There is a particularly established body of case law on legitimate reasons in the context of pharmaceuticals which are often repackaged, relabelled or rebranded to enable them to meet the legal requirements – and therefore be sold – in a jurisdiction different to the one in which they were originally marketed.
Who is responsible for enforcement?
The provisions outlined above can be enforced via a variety of different methods.
- Criminal offences: The criminal provisions are enforced by a combination of private rights holders (via private criminal prosecutions) and public bodies (such as customs, Trading Standards and the police). For further detail on these options, please see tabs 4, 5, 6 and 7 of this guide.
- Civil wrongs: Unlike the criminal provisions, the civil provisions are enforced by rights holders only (via online brand enforcement such as notice and takedown and civil proceedings). For further details on these options, please see tabs 4 and 8 of this guide.
- Parallel imports: While trade in illegal parallel imports can constitute a criminal offence as well as a civil wrong, in practice, the provisions are enforced only by private rights holders through online brand enforcement such as notice and takedown and civil proceedings. For further details on these options, please see tabs 4 and 8 of this guide.
Enforcement in practice
- Due to the scale of counterfeiting issues, many big brands have designated brand protection teams independent of their legal teams. These are often led by detectives and specialists in this area and not lawyers. This reflects that enforcement of the relevant legal framework requires a cross-disciplinary approach involving online/technology-driven enforcement and engagement with customs, police and other regulatory bodies, alongside more traditional court actions.
- Collaboration with the public sector/enforcement officials is key. In the same way that brands do not have the time and resources to take action in relation to every infringement, neither do the officials. It’s important for brands to invest time working with officials to enable them to understand the specific issues involved and why they should be prioritised.
- All of the above actions will likely involve a public-facing element with associated risks to a brand's reputation. For further details on how to manage this, see tab 9 of this guide.