Knowledge and Trade Mark Offences and Defences.
Is it necessary for the prosecution to prove that the defendant had knowledge of, or the intent to infringe, a registered trade mark? First published in the Criminal Law & Justice Weekly (2009) 173 JPN 597.
Lord Nicholls of Birkenhead opened the speeches in the leading House of Lords case of R v Johnstone [2003] UKHL 28, with the words: "Counterfeit goods and pirated goods are big business. They account for between 5% and 7% of world trade. They are estimated to cost the economy of this country some £9 billion each year. Counterfeit goods comprise cheap imitations of the authentic article, sold under the trade mark of the authentic article, as with imitation 'Rolex' watches."
The Trade Marks Act
Section 92(1) of the Trade Marks Act 1994 ("TMA") provides that:
"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)."
S 92(2) TMA provides similarly worded offences relating to the unauthorised application of a registered trade mark to "material intended to be used" for labelling or packaging goods, or as related business paper or as advertising. It also creates offences of using or being in possession of such material. S 92(3) deals with articles specifically made or adapted for copying registered trade marks.
S 92(4) TMA restricts the ambit of s 92 to those cases where the trade mark has been registered in relation to the type of goods to which the offending trade mark has been applied or where the reputation of the trade mark in the UK is such that its use with respect to goods for which it has not been registered would take unfair advantage of it or be detrimental to its distinctive character or repute.
S 92(5) TMA provides the following statutory defence:
"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."
S 92(6) TMA provides that the penalty, on summary conviction, is a maximum of 6 months imprisonment and/or a statutory maximum fine and, on indictment, an unlimited fine and/or up to ten years imprisonment.
The Defendant's Knowledge
To what extent is it necessary for the prosecution to prove that the accused knew the goods he was dealing in were counterfeit, and to what extent might a lack of such knowledge enable the defendant to rely on the statutory defence in s 92(5) TMA? As we shall see, these are two quite separate questions and, whereas a lack of knowledge may support a statutory defence, it is not necessary for the prosecution to prove that the defendant acted knowingly in order to establish an offence under s 92(1), (2) or (3).
In Torbay Council v Satnam Singh (1999) 163 JP 744, the defendant exposed for sale, with a view to gain, garments bearing a sign identical to the registered trade mark "Teletubbies". The justices found that he had not known that the logo applied to the goods was a registered trade mark and that he had acted in good faith. They found that he had made out the statutory defence in s 92(5). On the prosecutor's appeal, Auld LJ held that: "It was not necessary to prove knowledge of or intent to infringe a registered trade mark. At first sight, this near absolute liability may seem harsh, especially when it is noted from s 92(6)(b) [TMA] that the offence carries a maximum penalty on indictment of an unlimited fine or imprisonment up to ten years or both. However, if the regime introduced by the Act is to operate as an effective protection both to registered proprietors of trade marks and consumers, it cannot sensibly depend on proof in every case of the trader's knowledge of the existence of the registration of the trade mark allegedly infringed, or on rebuttal of his assertion that he was unaware of the registration or its detail. Whilst that might be a workable approach for large retailers with sophisticated administrative and legal controls, it would not be so where protection is most needed, against market traders and other small retailers who may obtain their wares from disreputable and/or, as in this case, untraceable suppliers."
It follows that Auld LJ was in no doubt that a lack of knowledge on the defendants part did not preclude a finding of guilt. As for the statutory defence, Auld LJ concluded that it "can have no application to a defendant's state of mind as to whether at the material time there was or might have been a registered trade mark capable of infringement. Its wording makes plain that that is not its function. It does not speak of a reasonable belief in the absence of a registration. It speaks of a reasonable belief that the 'manner' of use of the sign did not infringe 'the registered trade mark'. … It presupposes an awareness by a defendant of the existence of the registration against which he can match his manner of use of the allegedly offending sign."
Torbay Council v Satnam Singh, was followed by the Court of Appeal in R v Keane [2001] FSR 63, but it was doubted by a differently constituted Court of Appeal in R v Rhodes [2002] EWCA 1390. In the Rhodes case the defendant was charged with infringing the "Nintendo" registered trade mark used on computer games, contrary to s 92(1) TMA. At his trial, the defendant sought to raise a statutory defence under s 92(5) TMA based on his contention that the counterfeiting was so convincing that he had reasonably believed the goods were genuine. The judge, however, ruled that this did not fall within the ambit of the statutory defence under which he had to have had a reasonable belief that the "manner" of use, not the use itself, of the sign did not infringe a registered trade mark. The defendant thereupon changed his plea to guilty but appealed against the judge's ruling. Andrew Smith J held that Torbay Council v Satnum Singh and R v Keane established that s 92(5) provided a broad general defence, albeit "subject to a limitation that a person is deemed to know about any registered trade mark so that he cannot, relying on the subsection, assert a defence that he was ignorant of it." On the facts, however, and notwithstanding the earlier authorities, Andrew Smith J held that the defendant in the instant case "did not seek to assert that". The defendant was asserting that he believed the goods to be genuine not that he did not know that "Nintendo" was a registered trade mark. He said: "The reference to the 'manner in which [the trade mark] was used' stipulates an additional ingredient in the belief which the defendant must hold, but does not mean that the defence is only available if the manner of its use rather than the use itself is the point in issue."
The Court of Appeal had occasion to consider s 92 TMA again in the case of S v LB of Havering [2002] EWCA Crim 2558 (sub nom, R v S (Trade mark defence)), where the primary issue was whether s 92(5) TMA imposed a legal burden of proof rather than a mere evidential burden and, if so, whether it was incompatible with Article 6(2) of the European Convention on Human Rights ("ECHR"). In that case, the defendant was a seller of clothing which bore well known brand names. He accepted that the goods were counterfeit, but maintained that at the time he offered them for sale he had thought they were genuine as they were of excellent quality and had come from a supplier he had dealt with for three years and who had told him that they were authentic. As in the case of Rhodes, therefore, the defendant was not contending that he did not believe there to be registered trade marks applied to the goods, but that he believed the goods were genuine and hence that the trade marks had been legitimately applied.
On the question of "knowledge", Rose LJ said that the only mental element set out in s 92(1) was the reference to "intent to cause loss to another" and, in relation to that, he said it "hardly is to be equated with mens rea in the way that phrase is usually understood". It is worth noting here that in R v Zaman [2002] EWCA Crim 1862, the Court of Appeal held that "with a view to" was not the same as "with intent to" and that the former phrase "simply means that the defendant had something in his contemplation, not necessarily something that he wanted or intended to happen but something which might realistically occur." It follows that, even if "with intent to cause loss to another" involved mens rea, the alternative and most common way in which an offence under s 92(1) might be committed, i.e. based on "with a view to gain for himself or another", did not include an element of mens rea.
In S v LB of Havering, Rose LJ went on to say that: "Nowhere in [s 92] is there indicated any requirement of dishonesty or bad faith on the part of the accused as an element of the offence. For example, the word 'knowingly' makes no appearance in s 92(1), (2) or (3). The whole emphasis is on the unauthorised sale, for profit, of goods bearing a purported registered mark. The defence bestowed by s 92(5) itself tends to confirm that. The defence is not confined to belief: it requires belief "on reasonable grounds". Thus a person may properly be convicted under s 92 even if he acted honestly; and it is not necessary to prove intent to infringe a registered trade mark: see Torbay Council v Singh. Indeed, as pointed out by Mance LJ in R v Keane, if mens rea relating to the fact of the infringement is to be read into s 92(1) then s 92(5) would seem to become largely redundant."
Statutory Defence – Reverse Burden of Proof
The defendant in S v LB of Havering, ante, further submitted that if, which he disputed, the construction of s 92(5) was such that it imposed a legal burden upon him to prove the statutory defence, it was incompatible with the presumption of innocence provided by Article 6(2) ECHR and hence, applying s 3 of the Human Rights Act 1998 and the principle enunciated in R v Lambert [2001] 3 WLR (HL), the relevant provisions should be "read down" such that s 92(5) imposed only an evidential burden upon him. Rose LJ held: "We are of the view that, as a matter of construction, applying English legal principles, s 92(5) does impose a legal (persuasive) burden on the accused. The first, and obvious, point is that s 92(5) commences with the words: 'It is a defence for a person charged with an offence under this section to show…' That is, moreover, to be contrasted with the immediately preceding sub-section (4) which provides that unless the stipulations there set out are fulfilled a person does not commit an offence. The language used in s 92(5) is classic language for imposing a legal (persuasive) burden on an accused. ... In our view, in the context in which they are here found, the words 'show that' are to be taken as synonymous with the words 'prove that'."
As for the defendant's submission that this was incompatible with Article 6(2) ECHR, Rose LJ said: "The drafting technique here adopted is clearly consistent with an intention that the provisions of subsection (5) are not to be regarded as an essential element of the offence. ... S 92 is a regulatory provision and the strong policy behind the [TMA], and mischief at which it is aimed, support the view that the use of such technique in this context is neither unprincipled nor arbitrary: unauthorised use of trademarks is the target of the legislation and the substance of this offence. Accordingly subsection (5) does not relate to an essential element of the offence and the meaning and effect of s 92 is such that the presumption of innocence is not infringed by subsection (5). Accordingly Article 6(2) [ECHR] has no application." The Court of Appeal further concluded that s 92(5) should not be 'read down' so as to impose only an evidential burden on the defendant. They concluded that the reverse burden of proof in s 92(5) was both necessary and justified: "It is defined within reasonable limits; it is proportionate, a proper balance being struck between the interests of the public and the interests of the accused."
A differently constituted Court of Appeal, in R v Johnstone [2002] EWCA Crim 194, had previously expressed the view that s 92(5) should be read down so as to impose only an evidential burden on the defendant. That decision was appealed to the House of Lords in R v Johnstone [2003] UKHL 28 and references herein to "Johnstone" are to that latter decision.
The Law Lords Rule
The certified question on the appeal to the House of Lords in Johnstone was whether it is a defence to a criminal charge under s 92 TMA that the defendant's acts do not amount to a civil infringement of the trade mark. So far as that question is concerned, Lord Nicholls said: "As a matter of construction s 92 does not require proof of civil infringement. In keeping with other offence-creating provisions, the ingredients of the offences created by s 92 appear on the face of the section. ... S 92 focuses simply on unauthorised use of 'a sign identical to, or likely to be mistaken for, a registered trade mark': s 92(1)(a), (2)(a) and (3)(a)." He went on to say, however, that it was "implicit in these provisions that the offending use of the sign must be use as a trade mark. ... Parliament cannot have intended to criminalise conduct which could lawfully be done without the proprietor's consent. ... Secondly, s 92(5) presupposes that the conduct of the person charged was an infringement of a registered trade mark. It would make no sense for reasonable belief in non-infringement to provide a defence if infringement was irrelevant so far as the criminal offences are concerned." This conclusion was consistent with the previous dicta of Lord Nicholls that "the essence of a trade mark has always been that it is a badge of origin."
The law lords agreed with the decision in S v LB of Havering, ante, that s 92(5) TMA imposed a legal (or persuasive) burden of proof on the defendant and that it was not incompatible with Article 6(2) ECHR. Lord Nicholls said: "I entertain no doubt that, unless this interpretation is incompatible with article 6(2) of the Convention, s 92(5) should be interpreted as imposing on the accused person the burden of proving the relevant facts on the balance of probability. ... The contrary interpretation of s 92(5) involves substantial re-writing of the subsection. ... It provides him with a defence only if, he having raised an issue, the prosecution then fails to disprove the relevant facts beyond reasonable doubt. I do not believe s 92(5) can be so read. I do not believe that is what Parliament intended." This was, he said, compatible with the presumption of innocence in article 6(2) ECHR. In coming to that conclusion, he analysed the factors relating to s 92 which suggested that the loss of protection afforded to a defendant was justified. He enumerated these as: "(1) Counterfeiting is fraudulent trading. ... Protection of consumers and honest manufacturers and traders from counterfeiting is an important policy consideration. (2) The offences created by section 92 have rightly been described as offences of 'near absolute liability'. The prosecution is not required to prove intent to infringe a registered trade mark. (3) The offences attract a serious level of punishment: a maximum penalty on indictment of an unlimited fine or imprisonment for up to ten years or both, together with the possibility of confiscation and deprivation orders. (4) Those who trade in brand products are aware of the need to be on guard against counterfeit goods. They are aware of the need to deal with reputable suppliers and keep records and of the risks they take if they do not. (5) The s 92(5) defence relates to facts within the accused person's own knowledge: his state of mind, and the reasons why he held the belief in question. His sources of supply are known to him. (6) Conversely, by and large it is to be expected that those who supply traders with counterfeit products, if traceable at all by outside investigators, are unlikely to be co-operative. So, in practice, if the prosecution must prove that a trader acted dishonestly, fewer investigations will be undertaken and fewer prosecutions will take place." His Lordship concluded that, "factors (4) and (6) constitute compelling reasons why the s 92(5) defence should place a persuasive burden on the accused person. Taking all the factors mentioned above into account, these reasons justify the loss of protection which will be suffered by the individual. Given the importance and difficulty of combating counterfeiting, and given the comparative ease with which an accused can raise an issue about his honesty, overall it is fair and reasonable to require a trader, should need arise, to prove on the balance of probability that he honestly and reasonably believed the goods were genuine. ... The persuasive burden placed on an accused person by the s 92(5) defence is compatible with article 6(2)."
It will be noted that Lord Nicholl's factor (2), above, effectively paraphrases, and hence endorses, what Auld LJ said in Torbay Council v Satnam Singh, ante, that is that s 92 created "near absolute liability" and that "it was not necessary to prove knowledge of or intent to infringe a registered trade mark." Although Lord Nicholls did not specifically repeat Auld LJ's use of the word "knowledge", there can be no doubt that had he disapproved of that part of Auld LJ's dicta he would have said so. Lord Nicholl's, however, did not agree with Auld LJ's judgment in the same case so far as it related to the defence in s 92(5). He noted that Auld LJ had held that the reference in s 92(5) to a reasonable belief that the "manner" of use of the sign did not infringe the registered trade mark "presupposes an awareness by the defendant of the existence of the registration against which he can match his manner of use of the allegedly infringing sign". Lord Nicholls said that he shared the doubts expressed by the Court of Appeal in R v Rhodes, as to the correctness of Auld LJ's interpretation. He said: "The interpretation adopted in the Satnam Singh case draws a distinction Parliament cannot have intended. The language of the subsection gives no support to this distinction. S 92(5) is concerned to provide a defence where the person charged has a reasonable belief in the lawfulness of what he did. Those who act honestly and reasonably are not to be visited with criminal sanctions. It makes no sense to confine this defence to cases where the defendant is aware of the existence of the registered trade mark and exclude altogether those cases where the defendant is not. S 92(5) provides a defence where the defendant believes on reasonable grounds his use of the sign does not infringe a registered trade mark of whose existence he is aware. It would be extraordinary if the subsection does not equally furnish a defence in the stronger case where the reason why the defendant believes his use of the sign does not infringe a registered trade mark is that he reasonably believes no relevant trade mark is registered. S 92(5) is to be interpreted as including the latter case as well as the former."
Hence, the following principles emerge:
1. Knowledge is not an element of the offences in s 92(1), (2) or (3) TMA, (although the word "intent" does introduce a mental element to some variants of the offences) and, in particular, the prosecution is not required to prove that the defendant had knowledge of, or the intent to infringe, a registered trade mark.
2. The burden of proof under the statutory defence in s 92(5) TMA is a legal burden which rests on the defendant to prove on the balance of probabilities.
3. S 92(5) provides a defence where the defendant believed on reasonable grounds that his use of the sign did not infringe a registered trade mark the existence of which he was aware.
4. S 92(5) also provides a defence where the defendant believed on reasonable grounds that no relevant trade mark was registered. Knowledge, or lack of knowledge, that a trade mark was registered could therefore be a factor in a defence based on this formulation of the defence. But, the material consideration is the defendant's "belief" rather than his "knowledge" and it is for him to prove that it was reasonable for him to hold that belief.
Honesty, Belief and Presumed Knowledge
The most significant authority on s 92(1) and (5) TMA, since Johnstone, came with the Court of Appeal's decision in Essex Trading Standards v Singh [2009] EWCH 520 (Admin). In that case, the defendant was tried for offences of having in his custody or control 392 pairs of "Nike" trainers and 15 pairs of "BAPE" trainers contrary to s 92(1)(c) TMA. The magistrates found that he was unemployed, but that he had been helping out the owner of a market stall, who was suffering drug withdrawal symptoms. The magistrates also found that the defendant had asked the owner of the goods, who he had known and trusted for 20 years, if they were counterfeit and that he was told they were clearance stock and that there was nothing wrong with them. The defendant had experience in selling ladies' fashion shoes but none with sports shoes and he was not able to recognise counterfeit trainers. The magistrates found that he was not paid for his work and that the owner, who was feeling too unwell to do it himself, had asked him to sign the stall rent agreement for the day. It was while the owner was resting in his brother's van (in which the goods had been taken to the market) that the defendant was found in sole charge of the stall and was arrested. The magistrates decided that the defendant had counterfeit goods in his custody or control but that, applying the principle in Johnstone, that "those who act honestly and reasonably are not to be visited with criminal sanctions", he had made out the statutory defence in s 92(5) TMA. The magistrates were also influenced by the defendant's good character. The prosecution appealed by way of case stated.
Goldring LJ, commenced the decision making part of his judgment with the following three sentences: "The respondent knew that the goods had to be genuine. As the authorities establish, he must be treated as having been aware of the existence of the registered trademark. S 92(5) places a legal persuasive burden on the respondent: see S v LB of Havering ... and the speeches of their Lordships in R v Johnstone." In the first of these sentences, Goldring LJ is doing no more than to state, as a fact, that the defendant in this case was aware that it was an offence to sell goods that were counterfeit. His second sentence is a statement of law which he says is derived from "the authorities". His third sentence is also a statement of law and he gives the authorities from which it is derived. As this third sentence specifically refers to s 92(5), it might be assumed that the sentence which precedes it also applies to s 92(5). That, however, cannot be so as Johnstone, far from being an authority for the proposition that, for the purposes of the statutory defence a defendant must be treated as having been aware of the existence of the registered trade mark, it is authority that the defence is open to a defendant who wishes to contend that he believed on reasonable grounds that no relevant trade mark was registered. If Goldring LJ is not to be taken as having totally misdirected himself, it must follow that his second sentence related to the offence as set out in 92(1). But, where do the authorities establish that a defendant must be treated as having been aware of the existence of the trademark for the purposes of the offence?
In, S v LB of Havering, Rose LJ followed the dicta of Auld LJ in Torbay Council v Satnam Singh, ante, that "if the regime introduced by the Act is to operate as an effective protection both to registered proprietors of trade marks and consumers, it cannot sensibly depend on proof in every case of the trader's knowledge of the existence of the registration of the trade mark allegedly infringed, or on rebuttal of his assertion that he was unaware of the registration or its detail." Arguably, if the prosecution does not have to prove the defendant's knowledge of the existence of the registered trade mark, then, as Goldring LJ said, "he must be treated as having been aware of the existence of the registered trademark." What the authorities actually establish, however, is that knowledge of the existence of the registered trade mark is not an element of the offence and hence importing a presumption of knowledge into the offence is unnecessary. Although, in terms of what the prosecution has to prove under s 92(1) TMA, it may amount to the same thing; the established point of law is not that the defendant is deemed to be aware of the registered trade mark, but that his state of knowledge in that regard is irrelevant.
So far as the defendant's reliance, in Essex Trading Standards v Singh, on the statutory defence is concerned, Goldring LJ held that: "The issue is whether the respondent discharged the burden upon him under section 92(5). Did he show that he believed on objectively reasonable grounds that these were genuine goods? ... In my view, the evidence advanced by the respondent falls far short of that needed to displace the burden. The goods were taken in a van which was not [that of the owner of the goods]. The respondent knew their price was low. The sole basis for his professed belief was the word of a drug addict, who was apparently suffering from an overdose and unwell nearby. The respondent neither saw nor sought independent evidence, such as documentation, relating to the goods' supply or their provenance. Indeed, he could hardly have done less. In my view, no Magistrates' Court could reasonably have concluded that his belief that the goods were not counterfeit was arrived at on reasonable grounds. As to [the magistrates'] reference to the application of the principles in Johnstone, they failed, as it seems to me, to have regard to both of the elements referred to in that part of the case which they have cited ... It is not enough to conclude that the defendant acted honestly. He has, too, to act reasonably, in other words on reasonable grounds." Goldring LJ also concluded that, although the magistrates were entitled to have regard to the defendant's good character in deciding whether or not he was acting honestly, "his character ... was irrelevant in deciding whether the grounds upon which he relied were reasonable."
Significantly, Goldring LJ has made it clear that Lord Nicholls dicta in Johnstone that: "Those who act honestly and reasonably are not to be visited with criminal sanctions", was not providing an alternative defence to s 92(5). However honest the defendant might have been, he cannot make out a statutory defence under s 92(5) unless he acted reasonably.
VICTOR SMITH