Strict nature of Section 92 defence underlined by High Court ruling

United Kingdom
In Essex Trading Standards v Singh ([2007] EWHC 520, March 3 2009), the High Court of England and Wales (Divisional Court) has allowed an appeal by Essex Trading Standards, holding that a market trader charged with the criminal offence of trademark infringement under Section 92(1)(c) of the Trademarks Act 1994 for the possession of counterfeit trainers had failed to show objectively reasonable grounds for believing that the goods were genuine. 

Wallati Singh was charged by Essex Trading Standards under Section 92(1)(c) on the basis that he had in his custody or control in the course of a business trainers bearing NIKE and BATHING APE marks or logos which were likely to be mistaken for registered trademarks, with a view to gain for himself or another and without the consent of the trademark owners.
The prosecution argued the Nike and Bathing Ape trainers were in Singh’s custody or control as he was the only adult at the stall at Pitsea Market (Essex, England) and had signed a rental agreement for that day. Singh maintained that he was in control and custody of the goods only to the extent that he was helping his friend, Mr Hooper, a drug addict. When Singh asked if the goods were counterfeit, Hooper had informed Singh that the goods were bought as clearance stock and that there was nothing wrong with them. Singh argued that:

  • he had trusted a man he had known for over 20 years;
  • he had no experience in selling sports shoes and would not have recognized the goods as counterfeit; and
  • he believed on reasonable grounds that the goods did not infringe registered trademarks.
The magistrates acquitted Singh. While on the evidence the magistrates found that Singh had control and custody of the counterfeit trainers, they held that he qualified for the statutory defence under Section 92(5) since he believed on reasonable grounds that his actions did not infringe the trademarks. The magistrates had seen examples of the counterfeit goods in question and professed to “understand the difficulties in recognizing if any [were] counterfeit”. Singh had asked Hooper whether the stock was counterfeit, and gave evidence that he would not have gone to Pitsea Market if he had known that it was. This was corroborated by Hooper’s evidence. In reaching their decision, the magistrates referred to Sliney v London Borough of Havering ([2002] EWCA Crim 2558) and R v Johnstone ([2003] 3 All ER 884). 
On appeal, the High Court held that "no Magistrates’ Court could reasonably have concluded that [Singh’s] belief that the goods were not counterfeit was arrived at on reasonable grounds". As the authorities had established, Singh was to be treated as having been aware of the existence of the registered trademarks. Section 92(5) placed a legal persuasive burden on Singh under Havering and Johnstone. The issue was whether Singh had discharged that burden - namely, whether he had shown that he believed on objectively reasonable grounds that the goods were genuine. In the court’s view, the evidence advanced by Singh fell “far short” of that needed to displace the burden. The goods were taken in a van which was not Hooper’s. Singh knew their price was low. The sole basis for his professed belief was the word of a drug addict, who was apparently unwell and suffering from an overdose. Singh neither saw nor sought independent evidence relating to the goods’ supply or their provenance.
As to the application of the principles in Johnstone (specifically, that those who act honestly and reasonably are not to be visited with criminal sanctions”), the court considered that the magistrates had failed to have regard to both of the elements referred to in that case. It was insufficient to conclude that Singh had acted honestly. On the evidence, the magistrates were bound to conclude that Singh had not acted reasonably. While the magistrates were entitled to have regard to Singh’s good character in deciding whether he had acted honestly, his character was irrelevant in deciding whether the grounds upon which he had relied were reasonable.  

The court’s approach illustrates the strict nature of the Section 92(5) defence in placing the legal burden firmly on the defendant.
Désirée Fields, McDermott Will & Emery UK LLP, London

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