Boulter, R. v [2008] EWCA Crim 2375

Case No 200706098 C3[2008] EWCA Crim 2375
IN THE COURT OF APPEAL
CRIMINAL DIVISION
Venue Royal Courts of JusticeDate Tuesday, 7th October 2008
Strand
London, WC2A 2LL
B e f o r e:
LORD JUSTICE TOULSON
MR JUSTICE GRIFFITH WILLIAMS
RECORDER OF WINCHESTER
(SITTING AS A JUDGE OF THE COURT OF APPEAL CRIMINAL DIVISION)
Between
R E G I N ACrownv
Between
GARY BOULTER
Computer Aided Transcript of the Stenograph Notes ofWordWave International LimitedA Merrill Communications Company190 Fleet Street London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838(Official Shorthand Writers to the Court)
Mr O Willmott appeared for Applicant
J U D G M E N T

LORD JUSTICE TOULSON:

[1]On 23rd October 2007, at Bristol Crown Court before HHJ Darwall-Smith, the applicant pleaded guilty to 19 counts of unauthorised use of a trademark contrary to section 92(1)(c) of the Trademark Act 1994. He asked for a further 144 similar offences to be taken into consideration. He renews his application for leave to appeal against conviction following refusal by the Single Judge. The pleas of guilty followed a ruling by the judge on whether the defence, set out in the defence statement, gave the applicant a defence as a matter of law.[2]The facts in short were that, on 1st December 2005, a Trading Standards Officer and police executed a warrant at the applicant's home in South Gloucestershire. Police seized a stock of counterfeit and pirated goods, including 1640 DVDs of feature films, 457 DVDs of pornographic films and 232 CDs, together with equipment used to create counterfeit and pirate goods. The relevant counts in the indictment concerned either CDs or DVDs which bore on the packaging copies of logos of EMI or other companies of similar repute. The goods were counterfeit goods in the sense in which that term was used by Lord Nicholls in R v Johnstone [2003] UKHL 28.[3]The defence statement advanced the following proposed defence:
"The material bearing the trade marks was of such poor quality that no one could think that its trade origin was that of the trade mark owner. Accordingly, the use of the trade marks was not likely to jeopardise the guarantee of origin which constituted the essential function of the trademark rights owned by the trade mark owners, see Arsenal Football Club plc v Reed [2003] EWCA Civ 696; [2003] 3 All ER 865. It is therefore denied that what the Defendant undertook constituted a civil infringement of the trademark or, therefore, a criminal offence, see R v Johnstone. The situation is similar to that encountered by the Court of Appeal (Criminal Division) in the case of R v Issac [2004] EWCA Crim 1082."
The judge ruled that it was immaterial whether the quality of the counterfeiting was so poor that no-one would think that its trade origin was that of the trademark owner. In the light of that ruling the applicant entered his pleas of guilty.[4]Mr Willmott has renewed before this court the argument which was advanced to the judge and was considered by the Single Judge when he refused leave to appeal. We have been referred to the three authorities mentioned in the defence statement. The starting point is the decision in Johnstone. The court there held, first, that there is no criminal offence under section 92 if the intended usage of the goods would not involve an infringement under section 10 and, secondly, that the essence of a trademark is that it is a badge of origin. So if a particular name is registered as a trademark, and the name is used by someone else for a purely descriptive purpose there is no trademark infringement.[5]The applicant argues that in order for there to be a civil infringement there had to be a likelihood of the public being deceived or confused. In our judgment the fatal flaw in this argument is that it overlooks an important distinction between section 10(1) and 10(2), which the Court of Appeal emphasised in the judgment of Aldous LJ in paragraph 15 of the Arsenal case. Section 10(1) provides:
"A person infringes a registered trade mark if he uses in the course of trade a sign which is identical with the trade mark in relation to goods or services which are identical with those for which it is registered."
Section 10(2) provides: "A person infringes a registered trade mark if he uses in the course of trade a sign where because- (a) the sign is identical with the trade mark and is used in relation to goods or services similar to those for which the trade mark is registered, or (b) the sign is similar to the trade mark and is used in relation to goods or services identical with or similar to those for which the trademark is registered, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the trademark. It can thus be seen that, in the case of an alleged section 10(2) infringement giving rise to criminal liability under section 92, it would be necessary to establish the likelihood of confusion, but there is no such requirement in a case falling within section 10(1). It should be noted that Issac was a section 10(2) case. The present case is a section 10(1) case, for in this instance the trademark, however badly it may have been copied, was identical with the trademark registered by the various proprietors, and the goods which were found in the applicant's possession in the course of his trade were identical with the goods for which those trademarks were registered.[6]It is nevertheless submitted by Mr Willmott that it still had to be established that the intended usage of the goods was a trademark use. That is correct, subject to what is meant by trademark use. In Johnstone itself, Lord Walker observed at paragraph 67(2):
"If use is of the same mark for the same goods (referred to in argument as double identity) liability is (subject to the question of trade mark use) automatic: section 10(1)..."
One then comes to what was meant by Lord Walker as "the question of trademark use". It is necessary to be rather careful in the use of this term because it has no statutory definition and appears not always to be used in the authorities in precisely the same sense. In Johnstone the two members of the appellate committee who gave judgments were Lord Nicholls and Lord Walker and they were plain in their use of the term. Lord Nicholls, in a section headed "Trade mark use: indication of trade origin", said at paragraph 13:
"The message conveyed by a trade mark has developed over the years, with changing patterns in the conduct of business ... But the essence of a trade mark has always been that it is a badge of origin. It indicates trade source: a connection in the course of trade between the goods and the proprietor of the mark ... If descriptive words are legitimately registered, there is still no reason why other people should not be free to use the words in a descriptive sense, and not in any trade mark sense."
He went on to elaborate the distinction between use as a badge of origin and use as part of a description of goods. Lord Nicholls' approach to the judgment of the European Court of Justice in the Arsenal case was that it accorded with the characterisation of the purpose of the trademark as a matter of English law. He said at paragraph 15:
"The court [the ECJ], at [2003] RPC 144, 171, paragraph 48 re-affirmed its characterisation of the purpose of a trade mark in terms which accord with the approach of English law: the essential function of a trade mark is to guarantee the identity of origin of the marked goods or services to the consumer or end user by enabling him, without any possibility of confusion, to distinguish the goods or services from others which have another origin. For the trade mark to be able to fulfil its essential role in the system of undistorted competition which the Treaty seeks to establish and maintain, it must offer a guarantee that all the goods or services bearing it have been manufactured or supplied under the control of a single undertaking which is responsible for their quality."
Continuing to examine the judgment of the ECJ, Lord Nicholls noted at paragraph 17 that:
"The proprietor may not prohibit the use of a sign identical to the trade mark for goods identical to those for which the mark is registered if that use cannot affect his own interests as proprietor of the mark, having regard to its functions. Thus certain uses for purely descriptive purposes are excluded from the scope of Article 5(1)(a) of the Directive because they do not affect any of the interests which that provision aims to protect, and do not therefore fall within the concept of use within the meaning of that provision'."
Lord Nicholls considered that the distinction he was drawing between a mark as an indicator of origin and for descriptive purposes was one which a criminal court ought to be able to apply without difficulty. He said at paragraph 32:
"Despite Mr Perry's submissions, I see no reason to doubt that all those concerned are well able to grasp and apply the notion of a sign being used as an indication of trade origin as distinct, for instance, from a sign comprising words being used descriptively."
[7]It is to be noted that nowhere was Lord Nicholls concerned with the question of the quality of the reproduction of a badge of origin nor is there any ground to suggest that the prosecution must prove, where there is a straightforward counterfeiting of goods and the proprietor's logo, that the prosecution would have to prove an avoidance of risk of confusion as would be required in a section 10(2) case. Indeed, although Lord Nicholls was not expressly addressing that point, it is clear in our judgment that he cannot have thought that quality of reproduction of a trademark, as distinct from the issue whether it was a badge of origin at all, had any relevance in this area. We say that for this reason: if the argument being advanced by the applicant were sound, the extreme example of goods which would not confuse would be goods which were expressly marketed as fakes.[8]In referring to the legislative history, at paragraph 26, Lord Nicholls observed that under the old law:
"Difficulties arose in practice in proving the necessary intent in cases where at point of sale the trader disclaimed the authenticity of his goods. The trader wold describe his counterfeit products as 'brand copies' or 'genuine fakes'. Section 92 avoids this problem. In particular, intention to infringe a registered trade mark is not an ingredient of the offence."
[9]In our judgment, it is impossible to read Parliament as having intended that, where there is straightforward counterfeiting of goods and their registered trademark, it is open to a defendant to advance a defence that the quality was so poor as not to give rise to any risk of confusion, not only because that would fail to recognise the distinction drawn between section 10(1) and 10(2) but it would go a considerable way to assist the vice which Lord Nicholls at any rate thought that Parliament had attempted to combat, namely the counterfeiter who sells his wares as "genuine fakes".[10]Lord Walker referred in the passage already cited to the fact that usage of the same mark for the same goods would give rise to automatic liability subject only to the question of trademark use. He came to address that term at paragraph 76 of his judgment, where he described trademark use as "a convenient shorthand expression for use of a registered trade mark for its proper purpose (that is, identifying and guaranteeing the trade origin of the goods for which it is applied) rather than for some other purpose". He went on to say:
"It is easy to recognise those cases which fall squarely on one side or other of the line. If a counterfeiter sells a cheap imitation watch under the trade mark OMEGA, he is fraudulently engaging in trade mark use ... But if a publisher publishes a book named 'Mother Care/Other Care' (a serious study of the upbringing of young children of working mothers) there is no infringement of the registered trade mark of Mothercare UK Limited, despite the fact that the trade mark is registered for many classes of goods, including books."
[11]In the present case, it is not and could not seriously be suggested that the use of the EMI logo or other logos was anything other than a replication of those badges as signs of origin registered by the proprietors. It had no other rational purpose. Whether the reproductions were poor and whether they were actually likely to deceive is in our judgment neither nor there and for good reason about which we will say a little more in one moment.[12]The judgments of the House of Lords in Johnstone were delivered on 22nd May 2003. By chance, the judgment of this court in the Arsenal case was delivered on the previous day. It is right to say that Aldous LJ perhaps used the expression "trademark use" in a slightly broader sense that it was used by Lords Nicholls and Walker in Johnstone, but he held that whether the use complained of was a trademark use in the sense that was debated in that case was not the critical factor. That was a case in which goods bearing Arsenal's crest and cannon logo (dating from the club's origins at Woolwich Arsenal) was said by the trader to have been intended simply to encourage usage as a badge of loyalty to the club. Aldous LJ said at paragraph 37, with reference to the European Court of Justice's judgment:
"It is important to note that the ECJ is not concerned with whether the use complained about is trade mark use. The consideration is whether the third party's use affects or is likely to affect the functions of the trade mark. An instance of where that will occur is given, namely where a competitor wishes to take unfair advantage of the reputation of the trade mark by selling products illegally bearing the mark. That would happen whether or not the third party's use was trade mark use or whether there was confusion."
In our judgment the last sentence deserves emphasis. He went on to say at paragraph 45:
"Unchecked use of the mark by a third party, which is not descriptive use, is likely to damage the function of the trade mark right because the registered trademark can no longer guarantee origin, that being an essential function of a trade mark."
And in relation to the particular facts of that case he observed at paragraph 48:
"As found by the judge, the trade marks, when applied to the goods, were purchased and worn as badges of support, loyalty and affiliation to Arsenal, but that did not mean that the use by a third party would not be liable to jeopardise the functions of the trade marks, namely the ability to guarantee origin. To the contrary, the wider and more extensive the use, the less likely the trade marks would be able to perform their function. As the ECJ pointed out, the actions of Mr Reed meant that goods, not coming from Arsenal but bearing the trade marks, were in circulation. That affected the ability of the trade marks to guarantee the origin of the goods."
Those observations are equally apposite in the present case.[13]The conclusion we draw is that whether one follows the precise reasoning of the House of Lords in Johnstone or of Aldous LJ in the Arsenal case in this court makes no practical difference in the instant case. The goods in this case did not involve the use of a trademark for a descriptive purpose but, as already stressed, was pure counterfeiting. It self evidently damages the registered proprietor of a trademark if that proprietor is not able to control the use of its logo as a badge of origin and if goods of variable quality bearing that stamp are on the market. Although Mr Willmott disputed this, the reality is that the appellant is seeking to raise a novel defence, that, even though this was a straight counterfeiting case and there was no question of the mark being used for descriptive purposes, the fact that the quality of the counterfeiting was allegedly so poor as not to be likely to cause confusion amounted potentially to a defence. There is no foundation for this as a defence under the statute or in authority and, as already noted, it would reopen the door to people like the applicant selling their wares as genuine fakes. For those reasons we dismiss this renewed application.[14]It was submitted by Mr Willmott that the courts may not previously have appreciated the significant distinction between section 10(1) and 10(2). We do not accept that, because the distinction was emphasised by this court in the Arsenal case. However, although usually the practice of citing judgments on leave applications is frowned on by this court, if there is possible confusion in this area we think it right to make an exception in the case of this judgment and to indicate that we see no reason why it should not be cited.