Storage of goods and copyright infringement – a European Court’s decision

The European Court has ruled in case C‑572/17 Imran Syed, which concerns the following:

Mr Syed ran a retail shop in Stockholm (Sweden) in which he sold clothes and accessories with rock music motifs. In addition to offering the items for sale in that shop, Mr Syed stored such goods in a storage facility adjacent to the shop and in another storage facility located in Bandhagen (Sweden), in a suburb of Stockholm. It is established that Mr Syed’s shop was regularly restocked with merchandise from those storage facilities.

It has been determined that the sale of several of those items infringed trade marks and copyrights. Criminal proceedings were brought against Mr Syed for trademark infringement and breach of Law (1960:729) before the tingsrätten (District Court, Sweden). According to the åklagaren (Public Prosecutor, Sweden), Mr Syed infringed the claimants’ copyright by unlawfully making available to the public clothes and flags bearing the motifs protected by copyright. The prosecutor therefore took the view that all of the goods bearing such motifs which were in the shop and in the storage facilities were being offered for sale or distributed to the public, and that such acts therefore constituted an infringement of Law (1960:729).

The tingsrätten (District Court) found Mr Syed guilty of trade mark infringement concerning all the goods discovered. That court also found him guilty of infringing Law (1960:729) with regard to the goods bearing a copyrighted motif which were in the shop he was running, as well as with regard to the goods stored in both the storage facilities at issue, in so far as identical goods were offered for sale in the shop. The tingsrätten (District Court) took the view, in holding Mr Syed liable for the goods in the storage facilities as well, that the concept of ‘offering for sale’ goods which infringe the copyright held by the claimants did not apply solely to the goods which, at a given point in time, were located in Mr Syed’s shop, but also applied to the identical goods in the storage facilities. In contrast, that court held that the other goods in the storage facilities could not be regarded as having been offered for sale. For all of those infringements, the tingsrätten (District Court) sentenced Mr Syed to a suspended custodial sentence and to 80 per diem fines.

Hearing the case on appeal, the Svea hovrätt, Patent- och marknadsöverdomstolen (Svea Court of Appeal, Stockholm, Sweden: patent and commercial division) found that Mr Syed had infringed Law (1960:729) only in so far as the goods located in his shop were concerned and not in relation to the goods in the storage facilities. That court took the view that Mr Syed had stored those goods for the purpose of sale. However, it could not be considered that those goods had been offered for sale or distributed to the public. Similarly, the handling of goods in the storage facilities did not, according to the court hearing the appeal, constitute an attempt or preparation to commit an infringement of Law (1960:729). The sentence given to Mr Syed was reduced, in so far as Mr Syed was sentenced to a suspended custodial sentence and 60 per diem fines.

Before the Högsta domstolen (Supreme Court, Sweden), the referring court in this case, the Riksåklagaren (Prosecutor-General) claimed that Mr Syed should be found guilty in respect of the same goods as those which the tingsrätten (District Court) had found to establish an infringement of Law (1960:729). He also submitted that the Högsta domstolen (Supreme Court) should refer the matter to the Court of Justice for a preliminary ruling concerning the interpretation of Article 4(1) of Directive 2001/29.

Before the referring court, Mr Syed argued that it followed from the case-law of the Court of Justice that infringement of a rightholder’s distribution right by an offer for sale requires acts directed towards the public with the aim of transferring each specific item. He contended that the purchase and storage of goods cannot be considered to be such acts. An interpretation to the contrary would extend the scope of criminal liability, in breach of the principle of legality.

The referring court notes that Law (1960:729) and Directive 2001/29 do not expressly prohibit the storage of goods bearing a copyrighted motif for the purpose of sale. It adds that, following the decision of the Court of Justice of 13 May 2015, Dimensione Direct Sales and Labianca (C‑516/13, EU:C:2015:315), there may be an infringement of an author’s exclusive right under Article 4(1) of Directive 2001/29 as a result of measures or steps that take place prior to the performance of a contract of sale. Nonetheless, the question arises whether goods bearing a protected motif which are kept, by a person, in storage facilities can be regarded as being offered for sale when that person offers identical goods for sale in a retail shop run by him.

In those circumstances, the Högsta domstolen (Supreme Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘1. When goods bearing protected motifs 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?

2. Is it relevant whether the goods are held in a storage facility adjacent to the shop or in another location?’

The Court’s decision:

Article 4(1) of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society must be interpreted as meaning that the storage by a retailer of goods bearing a motif protected by copyright on the territory of the Member State where the goods are stored may constitute an infringement of the exclusive distribution right, as defined by that provision, when that retailer offers for sale, without the authorisation of the copyright holder, goods identical to those which he is storing, provided that the stored goods are actually intended for sale on the territory of the Member State in which that motif is protected. The distance between the place of storage and the place of sale cannot, on its own, be a decisive element in determining whether the stored goods are intended for sale on the territory of that Member State.