Singapore Court of Appeal decides freight forwarders of counterfeit goods not liable for trade mark infringement
26 February 2019
Burberry Ltd v Megastar Shipping Pte Ltd and another appeal [2019] SGCA 1
In the recent decision of Burberry Ltd v Megastar Shipping Pte Ltd and another appeal, the Singapore Court of Appeal considered whether freight forwarders are liable for trade mark infringement as importers/exporters of counterfeit goods. The Court of Appeal unanimously held that an importer or exporter is the person who brings or causes the goods to be brought into or out of Singapore respectively. However, in order to be liable for infringement under section 27 of the Trade Marks Act (“Act”), the importer/exporter must intend to do the act constituting the infringing use with knowledge or reason to believe that there was a sign present on the goods.
Facts
The respondent was a freight forwarder company providing transhipment services in Singapore. An Indonesian company hired the respondent to arrange for the transhipment of two sealed containers originating from China to Batam. During the transhipment process, Singapore Customs inspected the cargo and found more than 15,000 counterfeit goods. The goods were seized and the appellant trade mark proprietors commenced proceedings against the respondent for trade mark infringement under section 27 of the Act.
Under section 27 of the Act, a person infringes a registered trade mark if, without the consent of the trade mark proprietor, he uses in the course of trade a sign which is identical with the trade mark in relation to goods which are identical with those for which it is registered. A person uses a sign if he imports or exports goods under the sign.
High Court decision
The High Court’s decision was reported in Louis Vuitton Malletier v Megastar Shipping Pte Ltd (PT Alvenindo Sukses Ekspress, third party) and other suits [2017] SGHC 305. George Wei J (“Judge”) found that the signs on the counterfeit goods were identical to the appellant’s trade marks and were applied onto goods identical to those for which the appellant’s trade marks were registered. It was also clear that they were being used in the course of trade. The Judge thus had to decide whether the goods being imported or exported by the respondent attracted liability under section 27 of the Act.
The Judge concluded that the goods were imported into Singapore. However, the Judge was of the view that for the purposes of the Act, the importer and/or exporter of the goods was either the shipper in China or the ultimate consignee of the cargo in Batam. The mere fact that the respondent was named as the consignee in documents did not mean that it was as an importer or exporter for the purposes of the Act.
Accordingly, the Judge held that the respondent was not liable for trade mark infringement under section 27 of the Act and dismissed the appellants’ claims. Of the various plaintiffs in the High Court action, only Burberry Limited and Louis Vuitton Malletier appealed.
Court of Appeal decision
After considering section 27 of the Act, the Court of Appeal dismissed the appeal.
The Court of Appeal agreed with the High Court’s conclusion that goods in transit, once brought into Singapore, would constitute importation for the purposes of the Act. As the term “import” is not defined in the Act, the Court of Appeal referred to the definition of “import” in the Interpretation Act. The Court of Appeal reasoned that the context and structure of the Act was consistent with the definition of “import” in the Interpretation Act. The same reasoning applied to the term “export” under the Act. Thus, an importer or exporter is the person who brings or causes the goods to be brought into or out of Singapore respectively. This includes goods that are brought into Singapore only on transit. The importer or exporter is the person who brings or causes the goods to be brought into or out of Singapore respectively.
The Court of Appeal agreed with the High Court that a mere intention to export is insufficient to find liability under section 27 of the Act. However, the Court of Appeal qualified this statement by stating that where there are accompanying actions which are clearly directed at fulfilling the said intention to export or where there is clear evidence that export would definitely take place (for instance, the alleged exporter is under a contractual obligation to do so), a trade mark proprietor could apply for an injunction against the alleged exporter. The evidence must be clear that the export is imminent or would definitely take place.
The Court of Appeal also held that to establish liability, the alleged importer or exporter must have intended to do the act constituting the infringing use with knowledge or reason to believe that there was a sign present on the goods in issue. On the facts of the present case, there was no evidence that the respondent knew or had reason to believe that there were signs on the goods in issue. The Court of Appeal thus concluded that the respondent did not “use” the signs and was therefore not liable for infringement of the trade marks under section 27.
The introduction by the Court of Appeal of a mental element for trade mark infringement is notable. Prior to this decision, trade mark infringement had been construed as an act of strict liability. However, the Court of Appeal opined that the exact meaning of strict liability is “indeterminate”, and that the “only thing that can be said confidently of strict liability is that liability is not dependent on fault”.
The Court of Appeal cited a situation where an alleged infringer had intended to use the sign in issue and as its defence, asserted no knowledge that the sign was infringing. The Court of Appeal held that in order to constitute infringing use, an alleged infringer should at least be aware of the existence of the sign on the goods in question even if he did not know that the sign is an infringing trade mark. To require otherwise would be an “unduly broad and overreaching principle which could result in injustice.” However, if an alleged infringer is aware or has reason to believe that a sign is present, it is not a defence to say that the sign could not be seen because the goods were wrapped up in opaque packaging or kept in sealed boxes. In such a situation, the Court of Appeal was of the view that the alleged infringer would be using the sign in the course of trade pursuant to section 27 of the Act.
Impact of this decision
The Court of Appeal’s decision has great significance for trade mark proprietors wishing to bring infringement proceedings.
In order to establish liability against freight forwarders for trade mark infringement, trade mark proprietors must show that the freight forwarder has knowledge or reason to believe that there was a sign on the goods being shipped. However, since most freight forwarders would not have physically handled the goods in question, it is unlikely that they will have knowledge or reason to believe that there was a sign on the goods being shipped. Trade mark proprietors will have to consider commencing action against the shipper or ultimate consignee of the counterfeit goods, bearing in mind that they are unlikely to be based in Singapore. Nevertheless, trade mark proprietors are not entirely without recourse as they can still seek to destroy the infringing goods, even if the ultimate importer/exporter are not parties to the proceedings.
The requirement of a mental element significantly heightens the burden on proof for trade mark proprietors as they now cannot rely on strict liability to support their trade mark infringement action. The mental element required for all the types of infringing use provided under section 27 of the Act may not have been articulated by the Court of Appeal but a plaintiff trade mark proprietor will now have to show that some mental element existed in the mind of the alleged infringer.