“What, there was a mark on goods in the container?”: Loosening the trademark liability of a freight forwarder

Should knowledge of an alleged trade mark infringer matter for trade mark infringement liability? This question is especially acute when goods pass from hand to hand in a chain of distribution. Kat friends Beatrice Wee and Hong Qibin examine the case of Burberry Ltd v Megastar Shipping Pte Ltd , in which the Singapore Court of Appeal held that as far as a freight forwarder was concerned, an alleged infringer is only liable for trade mark infringement under section 27 of Singapore’s Trade Marks Act (“TMA”) if it had knowledge or reason to believe that a sign had been affixed on the goods in question.

Burberry Ltd (“BL”) and Louis Vuitton Malletier (“LVM”) are the respective proprietors of registered trade marks, “Burberry” and “Louis Vuitton”. Megastar Shipping Pte Ltd (“Megastar”) is a freight forwarder company that provides transshipment services. Several Chinese companies shipped, in two sealed containers from China to Singapore, counterfeit goods that infringed these trade marks (“Goods”). Megastar was tasked with arranging for transshipment of the containers from Singapore to Indonesia.

When the containers arrived in Singapore, their contents were inspected by Singapore Customs and seized for being counterfeit. The trade mark proprietors, including BL and LVM, whose marks were affixed on the Goods, commenced court proceedings against Megastar, alleging that their import and/or export constituted infringement of their respective registered trade mark(s).

The Singapore High Court dismissed the trade mark proprietors’ claims on the ground that Megastar was not the importer of the Goods. In this regard, the Judge explained that Megastar played no part in making the shipping arrangements, packing, or loading the containers on board the inbound vessels. The Judge further opined that if anyone was the importer, it was either the shipper in China or the ultimate consignee in Indonesia. Additionally, Megastar was held not to be the exporter of the Goods because its role was limited to arranging the transhipment of the containers. BL and LVM appealed against the Judge’s decision.

On appeal, the Singapore Court of Appeal affirmed the High Court’s decision that Megastar did not infringe the registered trade marks. This was because, while Megastar may have engaged in, or facilitated, the physical act of importing the Goods, it was not aware of, nor did it have any reason to believe, that any signs were affixed on the Goods stored in the sealed containers.

In so ruling, the Court of Appeal departed from previous Singapore jurisprudence, which had viewed as irrelevant a person’s knowledge with respect to liability for trade mark infringement. In this regard, the Court reasoned as follows:

First, jurisprudence suggesting that the mental state of an alleged infringer was irrelevant usually concerned –

people who did not know that the goods (containing the infringing sign) that they were selling or otherwise handling were not genuine from the trade mark proprietor rather than those who did not even know that a sign identical or similar to the trade mark existed on the goods at all.

Accordingly, precedent does not establish conclusively that a person who was unaware that any sign was applied on goods could be found liable for trade mark infringement.

Second, requiring an infringer to be aware that a sign was applied to the goods balances the need for effective enforcement of intellectual property rights against the over-extension of liability to honest commercial persons who are unaware of the existence of any sign. As a matter of fairness and legal policy, it would appear harsh to impose liability for trade mark infringement on persons who are completely unaware that the goods that they were forwarding contained any signs.

                                                                                     no mark in this box  

  

Nevertheless, a person may be liable if (s)he was aware that the goods contained a sign but was unaware that the sign infringed any registered trade mark. However, the Court of Appeal’s decision left open the question of why a person who knew that a sign was applied to the goods, but did not know or have reason to believe that the sign infringed any registered trade mark, should be held liable. Prima facie, there appears to be no material policy consideration that supports conferring different treatment to different categories of arguably innocent trade mark infringers.

By comparison, under section 49 of the TMA, which imposes criminal liability for importing into Singapore for the purpose of trade or manufacture any goods to which a registered trade mark is falsely applied, an accused may not be held liable even if (s)he was aware that the goods contained a sign.

This is because it is a defence for an accused to prove that (s)he: (a) had taken all reasonable precautions against committing an offence under this section and had no reason to suspect the genuineness of the mark, and on demand made by or on behalf of the prosecution, gave all the information in his/her power with respect to the persons from whom (s)he obtained the goods; or (b) had acted innocently (“Defences”).

That said, the decision in Public Prosecutor v Qiao Mu [2020] SGDC 59 (“Qiao Mu”) (as summarized on IPKat, here) demonstrates that the court would not easily allow a party to rely on these Defences. In Qiao Mu, the accused imported, among other things, counterfeit MagSafe power adapters and iPhone batteries ("Products"), knowing that the Products bore the Apple logo mark and “DESIGNED BY APPLE IN CALIFORNIA” mark. The accused was charged for possession of goods, for the purpose of trade, to which a registered trade mark was falsely applied under section 49(c) of the TMA.

Rejecting the Defences raised by the accused, the District Court found the accused guilty of an offence under section 49(c). Among other things, the District Court considered that the accused had failed to exercise prudence in selecting the supplier of these goods, as well as the low pricing and dubious packaging of the goods in question.

Ultimately, the Court of Appeal’s effort at balancing effective enforcement of intellectual property rights with protecting the interests of honest commercial persons is welcomed. Nevertheless, it remains to be seen to what extent this decision will serve as precedent for limiting liability in other situations in favour of persons who do not know, nor had reason to believe, that a sign infringed any registered trade mark.

Picture has been put into the public domain by its author.