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Session 2002 - 03
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Judgments - Regina v. Johnstone (Respondent) (On appeal from the Court of Appeal (Criminal Division))


SESSION 2002-03
[2003] UKHL 28
on appeal from: [2002] EWCA Crim 194




Regina v. Johnstone (Respondent) (On Appeal from the Court of Appeal (Criminal Division))



The Appellate Committee comprised:

  Lord Nicholls of Birkenhead

  Lord Hope of Craighead

  Lord Hutton

  Lord Rodger of Earlsferry

  Lord Walker of Gestingthorpe




Regina v. Johnstone (Respondent) (On Appeal from the Court of Appeal (Criminal Division))

[2003] UKHL 28


My Lords,

    1. 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. Pirated goods comprise illicit copies of the authentic article which are not sold under the trade mark of the authentic article. This would happen, for instance, when a person makes and sells unauthorised copies of computer software which is the subject of copyright. Thus, in the context of music recordings, a counterfeit compact disc is an unlawful copy of, say, a Virgin compact disc sold ostensibly as a Virgin product. A pirated compact disc is an unlawful copy of, in my example, a Virgin compact disc which is sold, not as a Virgin product, but under a different brand name.

    2. Another type of unlawful trading is 'bootlegging'. Like counterfeit records and pirated records, bootleg records are also big business. They comprise copies of an unlawful recording of a performance at a live concert. The recording is made at an auditorium or taken from a radio or television broadcast.

    3. Most bootleg products sold in this country are in compact disc format. They are mainly manufactured abroad and imported into this country without cases or paperwork. The importer then packages the discs, with created paperwork, into locally obtained cases.

    4. So it was with the subject matter of the present appeal. The present appeal relates to copies, in the form of compact discs, of bootleg recordings made of performances by well known performers. The case concerns the use, in connection with these compact discs, of the criminal sanctions contained in the trade marks legislation. Questions about trade marks arise in this context in the following way. When sold to the public each of these compact discs bears, in the usual manner, the name of the performer whose performance is recorded on the disc: Rolling Stones, or Beatles, or whoever it may be. This name also appears on the accompanying paperwork inside the disc's case. Nowadays leading performers register their professional names as trade marks in respect of recordings. So, it is said, sales of the discs labelled in this way constitute infringements of the performers' registered trade marks.

    5. The case arises out of the 'bootlegging' activities of Mr Robert Johnstone, the respondent to this appeal. His activities only came to light because of a misdirected parcel. Mrs Luddington lives in Hemel Hempstead. In October 1997 she was surprised to receive a large box. It contained 519 compact discs and associated artwork. The box had been mistakenly posted to her by Mr Johnstone from his home address in New Malden. Mrs Luddington notified Polygram Records, whose head of security retrieved the box and contacted the police.

    6. Police officers then searched Mr Johnstone's home. They were accompanied by a representative of the trade body, British Phonographic Industry. Some 500 compact discs and audio cassettes were seized during the search. The investigator from BPI considered that most of the compact discs found, as well as those sent by error to Mrs Luddington, were bootleg recordings. Mr Johnstone was charged with having committed criminal offences under section 92 of the Trade Marks Act 1994 ('the 1994 Act').

The statutory provisions

    7. Before elaborating further, and in order to explain the point of law which has arisen, I should refer briefly to the relevant statutory provisions. Part I of the 1994 Act concerns registered trade marks. Section 1 defines a trade mark as any sign capable of being represented graphically which is capable of distinguishing goods or services of one undertaking from those of other undertakings. A trade mark may consist of words, including personal names. The proprietor of a registered trade mark has the rights and remedies provided by the Act: see section 2.

    8. Sections 9 to 13 comprise a fasciculus of sections setting out the effect of a registered trade mark. Section 9(1) provides that the proprietor of a registered trade mark has the exclusive rights in the trade mark 'which are infringed by use of the trade mark in the United Kingdom without his consent'. The acts amounting to infringement if done without the consent of the proprietor are stated in section 10.

    9. Section 10 deals with several different situations. Section 10(1) concerns the case where a person in the course of trade uses a sign identical with a registered trade mark in relation to goods identical with those for which it is registered. Such use constitutes infringement:

    '(1) 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.'

    10. Section 10(2) addresses cases where either (a) a sign identical with a registered trade mark is used in relation to goods similar to those for which the trade mark is registered or (b) a sign similar to a registered trade mark is used in relation to goods identical with or similar to those for which the trade mark is registered. In such cases user constitutes infringement if there exists a likelihood of confusion on the part of the public. Section 10(3) concerns cases where a sign identical with or similar to a registered trade mark is used in relation to goods not similar to those for which the trade mark is registered. Then, in short, user constitutes infringement where the trade mark has a reputation within the United Kingdom and the sign takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.

    11. One of the ingredients of infringement as described in section 10(1) to (3) is the 'use' of a sign by a person. Section 10(4) gives some examples of what this means. A person uses a sign if he affixes the sign to goods or its packaging, or if he offers goods for sale under the sign.

    12. Section 11 specifies some limits on the effect of a registered trade mark. Section 11(2) provides:

    '(2) A registered trade mark is not infringed by -

    (a) the use by a person of his own name or address,

    (b) the use of indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of services, or other characteristics of goods or services, or

    (c) the use of the trade mark where it is necessary to indicate the intended purpose of a product or service (in particular, as accessories or spare parts),

    provided the use is in accordance with honest practices in industrial or commercial matters.'

Trade mark use: indication of trade origin

    13. The message conveyed by a trade mark has developed over the years, with changing patterns in the conduct of business: see the discussion in Scandecor Developments AB v Scandecor Marketing AB (4 April 2001, UKHL 21 of 2001). 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. That is its function. Hence the exclusive rights granted to the proprietor of a registered trade mark are limited to use of a mark likely to be taken as an indication of trade origin. Use of this character is an essential prerequisite to infringement. Use of a mark in a manner not indicative of trade origin of goods or services does not encroach upon the proprietor's monopoly rights. Dillon LJ observed trenchantly in Mothercare UK Ltd v Penguin Books [1988] RPC 113, 118:

    'it stands to reason that a Trade Marks Act would only be concerned to restrict the use of a mark as a trade mark or in a trade mark sense, and should be construed accordingly. If descriptive words are legitimately registered [as a trade mark], 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.'

    In this regard I cannot forbear adding the extreme hypothetical example beloved of trade mark lawyers. If a magazine publisher were to register an ordinary question mark, '?', as a trade mark for magazines this would not prevent the grammatical use of question marks on the covers of other magazines.

    14. This fundamental principle, limiting the scope of the rights of the proprietor of a registered trade mark, was well established under the early trade marks legislation. It was carried forward expressly into section 4(1)(a) of the Trade Marks Act 1938 ('being used as a trade mark'). Section 4(1)(b) muddied the waters a little. The wording of section 4(1)(b) gave rise to an unresolved controversy over whether, and to what extent, this paragraph further extended the rights of a proprietor: see the discussion in Kerly's Law of Trade Marks, 12th ed, (1986), pp 263-265 and the authorities cited there. This controversy is now of no more than historic interest.

    15. Against this background I turn to the 1994 Act. Section 10(1) to (3) specifies the acts which constitute infringement, but there is no express statement that the offending use must be use as a trade mark. I would not regard this as sufficient reason to suppose that Parliament intended to depart from such a basic principle. But on this, as so much else in the law of trade marks, it is necessary to look for guidance beyond the confines of the 1994 Act. One of the main purposes of this statute was to implement EEC Council Directive 89/104 of 21 December 1988. This directive, which I shall call 'the trade mark directive', was concerned with harmonising the trade mark laws of member states. Articles 5 and 6 of the directive made provision regarding the rights conferred by a trade mark and the limits of those rights. Sections 10 and 11 of the 1994 Act give effect to these two articles. So authoritative guidance on the interpretation of section 10 now comes from the European Court of Justice.

    16. For some time questions were raised on whether, given its derivation from article 5 of the trade mark directive, non-trade mark use could be caught by sections 10(1) to (3): see British Sugar Plc v James Robertson & Sons Ltd [1996] RPC 281, 291, per Jacob J, Philips Electronics NV v Remington Consumer Products [1998] RPC 283, 311-312, per Jacob J, and in the Court of Appeal, [1999] RPC 809, 823, per Aldous LJ. These doubts must now be regarded as laid to rest by the decision of the European Court in the 'football souvenirs' case of Arsenal Football Club plc v Reed [2003] RPC 144, 165. The court, at p 171, para 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'.

    17. The court then considered, at p 172, paras 51-54, the scope of the exclusive right conferred on the proprietor of a trade mark under article 5(1)(a) of the trade mark directive, which corresponds to section 10(2)(a) of the 1994 Act. The court held that the scope of this right is co-terminous with the function of registered trade marks:

    'the exclusive right under Article 5(1)(a) of the Directive was conferred in order to enable the trade mark proprietor to protect his specific interests as proprietor, that is, to ensure that the trade mark can fulfil its functions. The exercise of that right must therefore be reserved to cases in which a third party's use of the sign affects or is liable to affect the functions of the trade mark, in particular its essential function of guaranteeing to consumers the origin of the goods. The exclusive nature of the right conferred by a registered trade mark on its proprietor under Article 5(1)(a) of the Directive can be justified only within the limits of the application of that article. … 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'. (emphasis added)

    Plainly, section 10 of the 1994 Act is capable of being so construed. In accordance with the Marleasing principle (Marleasing [1990] ECR I-4135), it should therefore be so construed. Non-trade mark use is not within section 10(1) to (3).

Section 92 and Mr Johnstone's conviction

    18. Part II of the 1994 Act relates to Community trade marks and international matters. Community trade marks were brought into effect by EEC Council Regulation 40/94, which is directly applicable to this country without the need for legislation by Parliament. Part II of the Act makes provision for consequential provisions and other matters. Part III of the Act, from section 62 to section 97, contains administrative and supplemental provisions. Tucked away towards the end of these provisions are four sections which create criminal offences. The material section for the purposes of this appeal is section 92, bearing the heading 'Unauthorised use of trade mark, &c in relation to goods'. Section 92(1) provides:

    '(1) 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).'

    19. Section 92(2) creates a comparable offence relating to material intended to be used for labelling or packaging goods, or as a business paper in relation to goods, or for advertising goods. Section 92(3) creates a comparable offence relating to making or possessing what can loosely be described as printer's plates. The opening rubric of section 92(2) and (3) is the same as in section 92(1). The activities must be done with a view to gain or with intent to cause loss and, in either case, without the consent of the proprietor. Section 92(4) prescribes two limiting conditions. No offence is committed under the section unless one or other of these conditions is satisfied. I need mention only condition (a): that the goods are goods in respect of which the trade mark is registered. Section 92(5) provides a defence of reasonable belief of non-infringement:

    '(5) 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.'

    20. I can now return to the narrative. Mr Johnstone was arraigned at the Crown Court at Kingston on an indictment containing twelve specimen counts. Each count related to one compact disc. In each count the offence comprised the false application or use of trade marks, contrary to section 92(1)(c) of the 1994 Act. The particulars of offence under count 1 read as follows:

    'Robert Alexander JOHNSTONE on or before the 24th day of October 1997 with a view to gain for himself or another or with intent to cause loss to another and without the lawful consent of the proprietor had in his possession, custody or control in the course of a business, a compact disc entitled "The B Sides Collection - Volumes One and Two" bearing the trademark Bon Jovi, with a view to the commission of an act by himself or another which would be an offence under Section 92 (1)(b) of the Trade Marks Act 1994.'

    21. At trial on 25 October 1999 Mr Lane QC submitted on behalf of Mr Johnstone that before the Crown could establish an offence under section 92 the Crown must prove a civil infringement of the registered trade mark in question, in accordance with the provisions of sections 9 to 11 of the 1994 Act. The defence wished to rely on section 11(2)(b) and contend that the use of the performer's name on each of the CDs was not as an indication of trade origin. It was merely to indicate who was the performer. Alternatively, Mr Johnstone wished to rely on the honest and reasonable belief defence under section 92(5).

    22. Judge Mitchell, in a preliminary ruling, rejected these submissions. In doing so he followed several other decisions in the Crown Court. Section 92 was a 'stand alone' provision. It was a complete code so far as criminal offences were concerned, and it was not necessary to prove a civil infringement. 'Infringement' in section 92(5) meant unauthorised use as defined in the earlier provisions of the section. Mr Johnstone then pleaded guilty to the offences with which he was charged. He was subsequently sentenced to six months' imprisonment concurrent on each count. A confiscation order in the amount of £130,181.24 was made, together with forfeiture orders.

The Court of Appeal

    23. Mr Johnstone appealed. On 31 January 2002 the Court of Appeal (Criminal Division), comprising Tuckey LJ and Pumfrey and Burton JJ, allowed the appeal. In disagreeing with the judge, the court considered that unless the defences available to a claim for civil infringement of a trade mark were available in criminal proceedings section 92 would embrace behaviour which could not be the subject of a successful civil claim. This is not what Parliament intended. Section 92(5) presupposes that the illegal unauthorised use amounts to infringement as defined in sections 9(1) and (2) and 10: see the definition in section 104.

    24. The Court of Appeal said that to establish an offence under section 92(1) the prosecution need not prove the defendant's conduct constituted a civil infringement unless the defence raises a defence under sections 10 to 12. Then it will be for the prosecution to disprove such a defence. The court allowed Mr Johnstone's appeal because the judge's ruling had denied him the opportunity to have his defence under section 11(2)(b) considered by the jury. The court did not order a re-trial. Mr Johnstone had served his sentence of imprisonment, and the alleged offences occurred 4½ years ago.

Section 92 and use as a trade mark

    25. The certified question on this appeal to your Lordships' House is whether it is a defence to a criminal charge under section 92 of the 1994 Act that the defendant's acts do not amount to a civil infringement of the trade mark. On this, although he substantially modified his stance in the course of his reply, Mr Perry's opening submissions to the House were to the following effect. The 1994 Act provides for two separate regimes for the protection of trade marks and consumers. One regime is concerned with civil infringement, the other with criminal unauthorised use of trade marks in relation to goods. As a matter of construction section 92 does not require proof of civil infringement. In keeping with other offence-creating provisions, the ingredients of the offences created by section 92 appear on the face of the section. Parliament intended to create offences which would be simple for local weights and measures authorities to enforce and for magistrates and jurors to understand. Parliament did not intend to introduce questions of civil infringement into the criminal courts, save to the limited extent that an accused's belief he was not infringing a registered trade mark might amount to a defence.

    26. I agree that the ingredients of the offences created by section 92 are to be found within the section itself. Where I part company with Mr Perry's opening submissions is on the interpretation of section 92. Section 92 is concerned to prohibit the wrongful exploitation of registered trade marks. It replaced section 58A of the Trade Marks Act 1938. Section 58A made the fraudulent use of a trade mark an offence. 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 would 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. Instead, section 92 focuses simply on unauthorised use of 'a sign identical to, or likely to be mistaken for, a registered trade mark': section 92(1)(a), (2)(a) and (3)(a).

    27. In my view it is implicit in these provisions that the offending use of the sign must be use as a trade mark. Take, as an illustration, section 92(1)(a). This prohibits the application to goods of a sign identical to, or likely to be mistaken for, a registered trade mark. Apply this to a case where the registered trade mark consists of words capable of being used descriptively. Use of these words in their descriptive sense would be, in terms of trade mark law, unobjectionable. The registration of the word 'Alabaster' as a trade mark would not preclude others from lawfully stating that their product was 'made from alabaster'. Section 92 cannot have been intended to criminalise such conduct.

    28. This is my starting point. Within the section there are two clear indications confirming this interpretation. First, a prescribed ingredient of each offence is that the conduct in question is done 'without the consent of the proprietor' of the registered trade mark. This assumes the proprietor could object to the acts in question. Without his consent the acts could not lawfully be done. The section is aimed at criminalising conduct of this character, namely, conduct to which the proprietor could object. This is as one would expect. Parliament cannot have intended to criminalise conduct which could lawfully be done without the proprietor's consent. Parliament cannot have intended to make it an offence to use a sign in a way which is innocuous because it does not infringe the proprietor's rights. That would be to extend, by means of a criminal sanction, the scope of the rights of the proprietor.

    29. Secondly, section 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.

    30. Further, and looking more widely, the 1994 Act as a whole must be interpreted so far as possible to give effect to the trade mark directive. This obligation applies to provisions such as section 92, whose terms do not derive from the trade mark directive, as it does to provisions, such as section 10, which derive directly from the directive. Articles 5 to 7 of the directive embody a 'complete harmonisation' of the rules relating to the rights conferred by a trade mark: see Silhouette International Schmied GmbH & Co KG v Hartlauer Handelsgesellschaft mbH [1998] FSR 729, 735, para 25. They define the rights of trade mark proprietors in the Community: see Zino Davidoff SA v A & G Imports Ltd [2001] ECR I-8691, para 39. If section 92 were to be interpreted as applying in circumstances beyond those within sections 9 to 11, there might well be inconsistency with the trade mark directive.

    31. For these reasons section 92 is to be interpreted as applying only when the offending sign is used as an indication of trade origin. This is one of the ingredients of each of the offences created by section 92. It must therefore be proved by the prosecution. Whether a sign is so used is a question of fact in each case. The test is how the use of the sign would be perceived by the average consumer of the type of goods in question: see Sabel BV v Puma AG, Rudolf Dassler Sport [1997] ECR I-6191,6224, para 23.

    32. This should not give rise to practical difficulties for weights and measures authorities or for magistrates or jurors. 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. In the overwhelming majority of cases there should be little difficulty. Ironically, the present case is not so straightforward. I shall mention later why this is so.