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Image: Burberry

During the spring of 2013, two 40-foot-long cargo containers made their way from China to Indonesia. The contents of the containers were labelled as “household goods” and were destined to make a pit stop in Singapore, where Megastar Shipping, a Singaporean logistics company, would ensure that they were transferred to another vessel for the final leg of their trip, from Singapore to Batam, Indonesia. The problem? Upon inspection by customs, the “household goods” were found to – actually – be Chinese-made counterfeit goods, including replicas of Hermes’ most coveted bag, the Birkin, and double “G” bearing and “LV” emblazoned bags.

Seeking to hold someone accountable for the shipment that contained over $1 million worth of counterfeit handbags and other goods, Louis Vuitton, Gucci, Burberry and Hermès, as well as Sanrio – the maker of Hello Kitty toys – filed suits against Megastar, alleging that it had infringed their trademarks by importing and conspiring to export counterfeit goods.

The luxury goods powerhouses lost.

In its formal response to the complaints, Megastar’s counsel argued that the company was acting “as a ‘mere freight forwarder,’ and not a trader of the counterfeit goods,” after having been hired in March 2013 by a third party to arrange for the transfer of the shipments from Singapore to Batam. In other words, it was not the manufacturer of the products; it was not technically the importer (since its exclusive duty was to transport the products); and it was not aware that the products were counterfeits, And as a result, it not the one that Louis Vuitton, Gucci, Burberry, Hermès, and Sanrio should be suing.

Justice George Wei of the Supreme Court of Supreme Court agreed. In his decision, which was issued in late 2017, the judge dismissed the cases and ordered the luxury brands pay Megastar’s legal costs, asserting that they had, in fact, chosen to sue the wrong party. “The plaintiffs did not sue the shippers or the consignee […] There is no basis for the court to find that” Megastar was “the importer” or that it should be held accountable for the fakes.

Concluding his decision, Wei noted that “the facts of this case, while relatively straightforward, have raised numerous connected issues and questions of law. These have arisen because the reality is international trade is complex.”

On the heels of the loss, Burberry and Louis Vuitton together filed appeals, asking the Supreme Court of Singapore’s Court of Appeal to review the lower court’s findings, only to be handed yet another loss this week. The appeals court held that in order for Megastar to be held accountable for the counterfeit goods, the fashion brands would have to establish that Megastar “intended to import or export the [trademark-bearing] goods” and that it “knew or had reason to believe that [the trademarks] were used on the goods.”

If Louis Vuitton and Burberry could establish these elements, “it [would] not matter,” according to the court, “whether [Megastar] knew that the [trademarks] or their use was infringing.” However, the brands fell short, with the court holding that “the documents given to [Megastar] merely indicated household goods and other seemingly innocuous generic merchandise. There was no evidence that luxury products were included in the cargoes.” Moreover, the Court of Appeal stated, “There was also no evidence of any intention to import trademarked products. The facts surrounding the transactions showed that the respondent was merely providing a commercial service as freight forwarders in its ordinary course of business and nothing more.”

As a result, “imposing liability for infringement of trademarks on [Megastar] in this factual situation would be against the letter and the spirit [of Singapore’s Trade Marks Act].”

*The case is Burberry Limited and another v Megastar Shipping Pte Ltd [2019] SGCA 01, Civil Appeals No 237 and 238 of 2017.