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IP Australia is reviewing the penalties (criminal offences) and additional damages in trade mark law. Actually, they’ve been reviewing this for a while: we had the ACIP Review, and then an Options Paper (pdf) published by IP Australia back in November; submissions on the Options Paper close this week.

Anyway, I was just reading through the options paper again, and I noticed that IP Australia is proposing to adopt something like the tiered system of liability that we now have in the Copyright Act: or at least, some of it. They are proposing to have indictable offences for intentional trade mark infringement, and summary offences for negligent trade mark infringement. This, of course, is based on the Copyright Act system. And so I thought it was raising the question again: what kind of a silly standard for criminal liability for IP infringement is negligence?

I thought it might be worth commenting on this because you see, I’ve struggled with this before. When the Copyright Act provisions were introduced, with negligence offences, I couldn’t work out how one ‘negligently’ infringed copyright. So I had an exchange with a bona fide criminal law expert, Jeremy Gans.

Take a basic example of a trade mark offence, section 147. At the moment, section 147 is your basic ‘selling counterfeit goods offence’. It says that a person commits an offence if:

1. they intentionally sell, import (etc) goods
2. knowing or reckless as to whether a registered trade mark is falsely applied to them or in relation to them – where ‘false application of a trade mark’ means:
3. the trade mark or a sign substantially identical with it has been applied
4. without the permission of the registered owner, or of an authorised user, of the trade mark

There’s more but it’s a bit technical, that’s the basics.

Now, according to IP Australia (in the Options Paper on page 19), the indictable offence would require intention for the physical conduct elements of the offence, and knowledge or recklessness for the ‘circumstance‘ physical elements (this being the Criminal Code default under Commonwealth Law – see Clause 5.6 of Schedule 1 of the Criminal Code Act 1995). The new summary offence would have:

1. intention for the ‘conduct’ elements of the offence, and
2. negligence for the ‘circumstance’ physical elements of the offence, where that refers to negligence at the criminal level – ie you must fall grossly short of the ’standard of care’.

So what does that really mean? Well, I guess you would say that in the case of section 147 that means:

1. selling/importing the goods is a conduct element. So you would have to intend to sell/import the goods/services (not really controversial).
2. the existence of the registered trade mark, the fact that the mark applied to the goods is, or is substantially identical to, the registered mark, and the fact that the mark is applied without the permission of the registered owner, or of an authorised user, of the trade mark are all ‘circumstances‘, thus you would have to be negligent as these circumstances.

All clear? Not really. What does it mean to be ‘negligent’ as to how similar the trade marks are? What does it mean to be ‘negligent’ as to the permission status of the application of the trade mark? What is the ‘standard of care’ in relation to being aware of a registered trade mark and aware as to the permission status of the goods? What do we expect people to do, or to know? I had this debate with Jeremy back in 2006. Back then (talking about copyright) I said:

Like you, I have absolutely NO idea what the ‘standard of care’ for avoiding copyright infringement might be, let alone how one would fall ‘grossly’ short. I suppose there might be some contexts where it makes sense to talk about a standard of care. …[P]erhaps if you are establishing a video rental business, there might be certain standard steps to avoid receiving pirate, as opposed to authorised, copies of material. Imagine the video store which to save money decides to find an overseas supplier of videos – which provides a paper handwritten letter that says the copies are authorised? Grossly short of the standard one would expect perhaps?

Jeremy responded:

Your negligence example sounds plausible. But the truth is that no-one knows how criminal negligence works. It’s only ever been applied to crimes of violence, notably manslaughter (where the alternative ground of unlawful and dangerous act is much more common.) Main examples of negligence: trying to set yourself alight to prove to your girlfirend that you love her, but accidentally setting her alight instead; trying to get some trespassing boys off your property by chasing them into thick vegetation with your front end loader, running one of them over. Maybe you can draw some copyright analogies?

And herein lies the problem: the absence of a general, societally accepted standard of care in relation to knowledge of IP law. Knowledge of the way trade marks work is notoriously low. I can understand the justification offered by IP Australia: that “a person should not be able to avoid criminal liability on the grounds that they did not have some subjective awareness about the risks involved with their activities.’ I can understand that as a concept. on the other hand, as Jeremy said way back in 2006:

‘…this fault element is poorly suited to a commercial crime. What standard of care? And can an infringement ever be gross?’

It is easier to accept that, in relation to our actions causing physical injury to others, there might be a standard of care that pertains, that we can all understand. As to whether there is a well understood ‘standard of care’ in relation to ‘knowledge of trade mark (or copyright) law’ is another question.

I guess one motivation for including the summary offence is to save prosecutors from having to go through the motions of proving recklessness/subjective knowledge against fly-by-night counterfeiter types. Something like – when you have evil counterfeiter Mr Naughty who is selling fake Gucci handbags at the corner market, then when they ‘protesteth’ that they knew nothing of this thing you call trade mark law, you can at least ping them on a summary offence? But are you really telling me you can’t get them on recklessness under the present offence system?

I guess my concern here is that blithe use of the concept of ‘negligence’ without any actual attempt to articulate any kind of standard or even what is thought to be the standard just makes the law uncertain for all of us. Call me a purist but I don’t like it.

It is interesting, too, that IP Australia has recommended this kind of offence be instituted in Trade Mark Law on the basis that it is already in copyright – when, so far as I know, there hasn’t been any clear articulation of what the standard means in copyright law, and it hasn’t been tested in the courts (maybe I’m wrong?). Whereas when it came to whether there should be strict liability, one of the reasons given for not proposing introduction of strict liability offences was that ‘the strict liability offences … under the Copyright Act do not appear to have been used yet and as such their effectiveness can not be determined.’

And you know what? I decided I would go and have a look to see what they did in the UK. And you know, it’s kind of interesting. This is the offence under UK law: section 92 of the Trade Marks Act 1994. A person commits an offence if he:

1. with a view to gain for himself or another, or with intent to cause loss to another, and without the consent of the proprietor
2. 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.
3. 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.

As Andreas Rahmatian commented in the Modern Law Review (subscription required) (67 Modern Law Review 670-683), interestingly this comes close to a strict liability offence, because there is no intention/recklessness element involved regarding the trade mark status – you just have to intend to make money. I’m not, generally, much of a fan of strict liability, as anyone who has read my stuff on the criminal provisions in copyright law would know. But I have to admit that that language is at least clearer than the gobbledegook about negligence as to circumstance physical elements that we have under the Criminal Code.

Upshot? Personally I think that IP Australia need to think about this a little more. At the very least, they should aim to have an explanatory memorandum which is more enlightening than the one that AGs drafted for the Copyright Amendment Act 2006 as to how ‘negligence’ is meant to apply in this context. What kinds of things would be relevant to the standard of care? What kind of business should be considered in articulating that?