TRADEMARK INFRINGEMENT OF GREY MARKET PRODUCTS

A grey market is also referred to as a parallel market, i.e., markets where products are bought and sold apart from authorized trade channels. In other words, grey market is a place for unofficial trading. The products sold in these markets were originally intended to be sold through the authorized trade channels of the manufacturers. The term “grey market” is often confused with the term “black market”; but they may be distinguished as – for example, if a store owner is an unauthorized dealer of a certain high-end brand, the product of that brand is considered to be sold in the “grey market”. If the product is illegal, it would be selling on the "black market." Typical grey markets are small businesses built by individuals who are not authorized retailers of the goods being sold. These products are usually important goods that are expensive or not available in the country to which they are being sent to. This typically happens when the price of the good produced in one country is significantly higher compared to another country.

In R v. M and Ors., the UK Supreme Court upheld criminal proceedings against those engaging in possession and sale of trademarked products bought from the grey market, additionally, highlighting the need to curb such crouching activities.

Regarding the facts of the case, the defendants/appellants were engaged in the voluminous importation and sale of clothes and shoes bearing the trademarks of well-known brands, such as Ralph Lauren, Adidas and Fred Perry which were manufactured outside the EU. The goods that the defendants imported and sold in the UK fell into 2 neat categories. The first category consists of counterfeits – goods which the defendants purchased from those who were neither empowered to manufacture nor to sell them. The second category, on the other hand, consists of grey market goods – goods which their sellers were not empowered to sell.

While there was no dispute about the proposition that the defendants could be criminally prosecuted for the unauthorized application of registered trademarks to counterfeit goods, the question which the UK Supreme Court was called upon to answer was if the same was permissible for the unauthorized application of registered trademarks to grey market goods. The court answered this question in the affirmative, holding that the provision at issue in the UK Trademarks Act, 1994, covered within its four squares the application of unauthorized trademarks to grey market products.

Arguing that the criminalization of products bought from the grey market would constitute a disproportionate punishment, the Appellants urged the court to adopt an interpretation that would avert this consequence. Rejecting this argument, the court held that “There is in any event nothing disproportionate in the 1994 Act penalizing sales when the infringing trademark 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.”

In other words, if a defendant voluntarily chooses to purchase goods from the grey market and import and sell them in the UK while keeping the infringing trademark intact, reasoned the court, he cannot be allowed to later turn back and say that it is unfair for the Crown to criminally prosecute him for this conduct. If such a defendant wishes to shield himself from criminal liability, then he must sell the goods purchased on the grey market without the infringing trademark.

The observations in the present case are indeed a new development in the trademarks law in the sense of criminal proceedings. Such observations must be followed, implemented and adhered to not only by the government but also the manufacturers themselves. Counterfeit and dumping of goods is a common scenario these days. Such cause commercial loss to the manufacturers as their products are made available by unauthorized markets at low prices. Hence, constructive efforts curtailing such practices should be the need of the hour.

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