Far from an uncertain path, the UK criminal courts can be a swift and viable route in some IP cases, say Jeremy Asher, Giles Lane and Jennifer Guild.
Time is often of the essence, when dealing with intellectual property infringement. A matter of days can make a difference to a brand, design or copyright owner, in protecting against the damage caused by having infringing articles out in the ether.
Recent changes in both civil and criminal legal practice mean that IP owners need to move outside their comfort zones and into the realms of criminal law, in order to challenge IP infringements effectively.
The civil system: home, sweet home
Before we can convince you that the criminal law is a useful tool for enforcing IP rights, it is worth recapping some of the key benefits of enforcement via the civil procedure system:
- Simply put, there is a better understanding in the civil courts:
- There is an abundance of established case law and statutory procedures. Although the unpredictability of judges can never be discounted, the benefit of a history of tried and tested cases is that it gives a greater degree of confidence that your claim will succeed on those particular issues in a claim, in the event that it reaches trial (not to mention grounds for an appeal). An established precedent decision can also pressurise a defendant to cease infringing and settle a matter quickly;
- There is a wealth of specialised IP solicitors and counsel to plead your case; and
- There are specialised judges and even a specialised court – the Intellectual Property and Enterprise Court ("IPEC") – charged with presiding over IP matters, whose experience should reduce instances of ‘surprising’ decisions. In spite of the advantages of the criminal system, there is no escaping the fact that magistrates (or, even worse, a jury of 12 laypersons) will be inexperienced in dealing with IP issues.
Moreover, the burden of proof in the civil system ("a balance of probabilities") is easier to satisfy than the criminal burden ("beyond reasonable doubt").
- Interim injunctions can be obtained, usually very shortly after issuing civil proceedings (albeit expensively), subject to satisfying the court that, among other things, the claim has a reasonable prospect of success. In comparison with the criminal burden of proof, this is a relatively low threshold. Interim injunctions can stop the defendant from engaging in the infringing activities quickly, pending final resolution of the proceedings.
- You have the option of applying to strike out the defence, provided you can demonstrate to the court that the defence discloses no reasonable grounds for defending the claim. You could also apply for summary judgement, provided you can satisfy the court that the defence has no reasonable prospect of success. Either could result in a resolution of the matter within a few months (court lists permitting).
- The resolution of IP claims necessitates more than monetary compensation. The Trade Marks Act 1994(1) the Copyright, Designs and Patents Act 1988(2) and the Registered Designs Act 1949(3) all contain provisions allowing a court to grant a range of orders, including for delivery up, seizure and/or disposal of infringing articles and (in the case of trademarks) erasure of the offending sign from infringing materials.
- Finally, the availability of after the event and before the event insurance products means that all businesses can take steps to protect their IP interests and mitigate their concerns about having to meet the costs of admittedly costly IP litigation.
The criminal system: the ‘great unknown’
There are many reasons why IP owners may not have considered using the criminal law to enforce breaches of their IP rights. For many, the criminal law may fall out of their (or their adviser’s) comfort zone, or there may be no culture within an organisation of using the criminal law to enforce IP rights.
The number of offences is wide ranging. Therefore, criminal prosecutions in IP disputes can have an extremely powerful effect.
The Trade Marks Act 1994 sets out offences to protect against unauthorised use of a registered trademark (ie counterfeiting), including where a person applies a registered trademark to goods, or distributes or offers for sale or hire goods which bear a registered trademark or a sign likely to be mistaken for that mark (4).
The offences carry a penalty of up to 10 years’ imprisonment for those selling items which are likely to be mistaken for genuine branded products (5).
The only real substantive defence available is for the defendant to prove that they had made enquiries with the holder of the registered trademark, to ascertain whether or not the product they intended to sell was genuine, and that they had obtained the consent of the trademark holder to sell that product (6). The onus is also on the infringer to ascertain whether a registered trademark exists in the first place.
The Copyright, Designs and Patents Act 1988 contains a broad range of criminal liabilities, including for example:
- Making or dealing in infringing articles (7);
- Making, dealing with or using illicit recordings (8); and
- Making or dealing in devices and services designed or adapted to circumvent effective technological measures (9).
Most of the offences have no specific defence, and those that are available are limited. Additionally, the penalties can be extremely onerous. For example, selling, importing and/or distributing infringing articles carries a penalty of up to 10 years’ imprisonment and/or a fine (10).
The Intellectual Property Act 2014 was recently given Royal Assent. When the new laws enter into force later this year, new criminal offences will be introduced to the Registered Designs Act 1949 relating to unauthorised copying of registered designs.
In summary, a person will commit an offence if, in the course of a business, they intentionally copy a registered design, so as to make a product exactly, or virtually identical, to that registered design, and they do so knowing, or having reason to believe, that the design is a registered design and without the consent of the registered proprietor of the design (11).
It is an offence if, in the course of a business, a person deals in such products, for example, they import, offer to sell, or sell them, where they know or have reason to believe that a registered design has been intentionally copied without the consent of the registered proprietor of the design (12).
The accused will have a defence if they can show they did not reasonably believe the registered design was valid or that they did not infringe the design (13). However, if found guilty of these offences, an offender could be fined or imprisoned for up to 10 years (14).
Advantages of the criminal procedure
Perhaps most importantly, individuals, companies and other corporate entities can bring private prosecutions. Trading Standards are involved with prosecuting the most serious cases. However, budgetary cuts have reduced the number of Trading Standards-led IP prosecutions. Therefore, many IP rights owners are turning themselves to the criminal courts as a matter of course, despite the fact that the burden of proof is higher than in civil law. This may be because IP offence cases are, in practice, fairly easy to prove.
It is often cheaper to bring a criminal prosecution than to pursue a claim through civil litigation. Admittedly, costs in the IPEC are capped and the costs budget mechanisms introduced as part of the Jackson Reforms are intended to reduce the costs for High Court cases and also make it easier for litigants to anticipate the cost of pursuing civil proceedings. However, the jury is still out on whether or not costs budgeting will achieve these aims. Regardless, criminal prosecutions are far less costly and in many cases can result in full costs recovery.
It is also a misconception that civil litigation always provides the most effective remedies. The criminal courts have far reaching powers of enforcement. In particular, forfeiture can deprive the defendant of the major part of his assets with immediate effect (15).
Private prosecutions can:
- Be an extremely expedient means of stopping infringing behaviours;
- Generate considerable publicity to deter other infringers;
- Ensure that counterfeit items are forfeited and destroyed; and
- Demonstrate that the rightsholder is serious about protecting its IP.
Further, confiscation and/or compensation proceedings under the Proceeds of Crime Act 2002 sometimes lead to a greater financial recovery for an IP rights owner, compared with an account of profits under the civil system. A court can order a defendant to pay a penalty up to a financial value equivalent to the entire benefit derived from their criminal activities (ie more than just the loss/damage that the rights owner has suffered). If the court orders compensation, then all of this money will be paid to the prosecuting party, and the court can order the payment of compensation out of confiscated assets.
If the defendant is unable to pay the full amount when sentenced, an application may be brought at a later date to recover additional monies, in the event that the defendant later acquires further assets/ money.
The obligation imposed upon the defendant to pay is only ever discharged upon full payment. Vitally, the courts also have the power to impose prison sentences if the defendant defaults on payment.
The reality is that in many IP disputes dealt with via the civil procedure, the matter settles long before proceedings get to trial. Often a matter settles relatively swiftly after the claimant sends a letter before action or shortly after the issue of proceedings. In addition, the options for a settlement agreement are broad ranging (and can be kept confidential), and can also be extremely creative.
Nevertheless, if civil proceedings are issued against an infringer, they can be protracted and costly. With that in mind and in light of the advantages posed by the criminal system, the possibility of a private prosecution should be a tool that an IP rights owner keeps sharp and ready when faced with the question of how best to enforce their IP rights.
1. Trade Marks Act 1994, sections 15 and 16.
2. Copyright, Designs and Patents Act 1988, sections 99 and 100.
3. Registered Designs Act 1949, sections 24C and 24D.
4. Trade Marks Act 1994, section 92(1) to 92(4).
5. Id, section 92(6).
6. Id, section 92(5).
7. Copyright, Designs and Patents Act 1988, section 107.
8. Id, section 198.
9. Id, section 296ZB.
10 Id, section 107(4).
11. Registered Designs Act 1949, section 35ZA(1).
12. Id, section 35ZA(3).
13. Id, section 35ZA(4) and 35ZA(5).
14. Id, section 35ZA(8).
15. Proceeds of Crime Act 2002.