Following CJEU Syed ruling, Swedish Supreme Court establishes criminal liability through warehouse storage of copyright infringing goods

The storage of infringing goods with a view to sell them might trigger both civil and criminal liability: the Swedish Supreme Court confirmed all this in a recent case, which also included a referral to the Court of Justice of the European Union (CJEU).

Background

Mr Syed had a shop in the Old Town of Stockholm, in which he sold counterfeit clothes and accessories. Besides the store, the goods were also held at a storage facility close to the shop and in a warehouse located in the Southern part of Stockholm. He was criminally prosecuted and found liable for both trade mark and copyright infringement. As regards copyright, Syed was held liable not just for the items sold in his shop, but also for those held in storage. However, the first instance court ruled out that the latter would be relevant from a criminal standpoint. The decision was appealed, and the Swedish Patents and Market Court of Appeal excluded any liability of Syed for copyright infringement in relation to the items held in storage.

Gamla Stan (Old Town of Stockholm)

Following yet another appeal, the Swedish Supreme Court stayed the proceedings and made the following referral to the CJEU:

When goods bearing a protected motif are unlawfully offered for sale in a shop, can there also be an infringement of the author's exclusive right of distribution under Article 4(1) of Directive 2001/29 as regards goods with identical motifs, which are held in storage by the person offering the goods for sale? Is it relevant whether the goods are held in a storage facility connected with the shop or in another location?

The latter was answered in the affirmative by both Advocate General (AG) Campos Sánchez-Bordona [see here] and the Court of Justice of the European Union (CJEU) [see here]. Having established that storing counterfeit goods falls under the scope of Article 4(1) of the InfoSoc Directive, it was left to the referring national court to decide whether Mr Syed could be also held criminally liable for copyright infringement by storing the counterfeit goods in question.

The Swedish Supreme Court

The Swedish Supreme Court ruled (available only in Swedish) that Section 2 of the Swedish Copyright Act (SCA) sets out the scope of a rightsholder’s exclusive right by providing a list of cases in which a work is issued to the public. In particular, a work is issued “when copies of the work are placed on sale, leased, lent, or otherwise distributed to the public”. However, as opposed to trade mark infringement, the current provision did not cover situations such as storage of goods for commercial purposes. Adding to the above, Section 53 SCA sets out that: “Anyone who, in relation to a literary or artistic work, commits an act which infringes the copyright enjoyed in the work under [Section 2 SCA], shall, where the act is committed wilfully or with gross negligence, be punished by fines or imprisonment for not more than two years”. Both provisions transposed Article 4(1) of the InfoSoc Directive into Swedish law.

In this regard, and in consideration of the criminal nature of the case, it was disputed whether Mr Syed could be considered criminally liable for copyright infringement in relation to goods held in storage.

Nonetheless, since the CJEU’s judgment clarified that point it became apparent that Section 2 and 53 SCA – which govern copyright infringement on the basis of criminal liability – must be interpreted so as to include storage of counterfeits due for sale within the scope of the distribution right.

Concluding remarks

The criminal investigation showed that the goods held in storage were indeed intended to be distributed to the public by selling them in the store – thus amounting to an infringement of the rightsholder’s exclusive right of distribution. According to the Supreme Court’s judgment, there was no reason to make any other assessment than that Mr Syed had committed the act with intent, or at least with gross negligence.

The CJEU ruling confirmed the broad reading of the right of distribution, as already endorsed in earlier decisions, by including preparatory acts within the scope of Article 4(1) of the InfoSoc Directive. The Swedish court could not but follow the EU court on this and interpret national law accordingly.