Trade marks and the black market: why treating the symptoms won’t cure the disease 

In June, Entain wrote to the UK’s Intellectual Property Office (IPO) to make a point which, on first sight, is difficult to resist. Providing facilities for gambling to consumers in Britain without an operating licence is a criminal offence under s.33 of the Gambling Act 2005. Yet the IPO has happily registered several trade marks for unlicensed operators engaged in doing precisely that.

Why, asked Entain, should the state confer a legal badge of trade upon a business which cannot legally offer the services for which it seeks trade mark protection? Entain proposes that a new test be applied – namely that applicants for gambling marks must hold a Gambling Commission (GC) operating licence.

Fair point, fairly made

I have a lot of sympathy for Entain’s position. It must be galling for licensed operators who pay their duties, fund the statutory levy, operate with proper social responsibility and honour GAMSTOP self-exclusions (rather than deliberately targeting them), to watch unlicensed rivals applying for protection from the very legal system which they then ignore. 

But, as an IP lawyer, I know that it is not the right tool for the job. The IPO has already said as much. Examination of a trade mark application, it explained, “relates to the intrinsic properties of the mark itself” and involves no assessment of the conduct of the applicant.

The public policy objection in s.3(3)(a) of the Trade Marks Act 1994 is directed at marks which are themselves objectionable (for example, for being vulgar or confusing). The IPO is not equipped to act as a judge of the way its holder trades.

It is somewhat odd that black-market operators bother to register marks at all: you don’t actually need a trade mark in order to trade, and it is hard to see them queuing up at the High Court to sue infringers. Instead of being a badge of origin, black marketeers are presumably trying to use them as badges of respectability.

Sign of a failed system

Using intellectual property to quell the black market is the latest in a series of creative attempts to solve the problem – each a demonstration of a different failure. The GC itself boasts of its tactics for market disruption – citing long tallies of cease-and-desist letters, payment-blocking arrangements and search engine delistings.

Yet however many websites are shut down, every indicator shows the black market growing, not shrinking. Each disruptive tactic also throws into relief the absence of any effective criminal prosecution. Disruption is not the same as an effective cure. 

The deeper malaise

The problem lies in asking the criminal law to solve a problem which it is intrinsically incapable of solving. In 2014, parliament made it an offence for a foreign operator to deal with the UK public without a UK licence. Parliament can make any law it likes, but criminal enforcement is bounded by territorial limits: one cannot legislate effectively for Curaçao. 

The typical black-market operator sits offshore, holds no UK assets, and answers (if at all) to a regulator whose interest in the welfare of British consumers is little more than lip service. The principles of international comity mean that one state cannot, in general, impose its laws upon conduct occurring in another; and a blocked domain re-emerges under a new suffix within days. Against a defendant with nothing here to seize, no licence to revoke and no reputation to lose, there is no effective means of enforcement.

The only long-term solution 

Creating UK laws to combat a non-UK black market will never work – conduct which is essentially foreign is not a problem that UK law (criminal or otherwise) can solve. The 2014 legislation couldn’t be plainer in its effect (or indeed in its ineffectiveness).

There is, however, one cure – with the twin merits of being future-proof and costing little to administer. Consumers are currently choosing the black market because the regulated industry can no longer effectively out-compete them for market share.

Regulatory restrictions, advertising restrictions and high levels of taxation all have suppressed the domestic market and thus allowed unregulated gambling to compete more effectively. A regulated sector taxed and restricted to the point where its product is visibly worse than the illegal alternative does not protect consumers; it simply loses them into the hands of its competitors.

Entain, then, is right to object to criminals wearing the livery of legitimate trade, and I applaud its ingenuity. But the trade mark register is not the right battlefield. At some stage, government will grasp the fact that the cheapest and most effective weapon against the black market, is a thriving regulated market. But things will have to get worse for a few years more, before that point is understood.

Carl Rohsler is one of the UK’s leading gambling lawyers, with more than three decades of experience in the sector. He has advised a number of the world’s most prominent gambling operators on regulation, tech and IP issues. Rohsler is a partner at Keystone Law and author/editor of several key academic works on gambling and licensing law.