International transit of counterfeit goods through multiple jurisdictions is a growing phenomenon which is increasingly accompanied by challenges to the traditional notion of trademarks as being “territorial” in nature and scope. In order to achieve a proper solution to the problem of counterfeit goods in transit, a delicate balance must be achieved between, on the one hand, permitting right holders to enforce their rights within the parameters of the TRIPS Agreement and, on the other hand, securing proper application of that law within the parameters of the General Agreement on Tariffs and Trade/World Trade Organization (GATT/WTO), hence in a manner which does not disrupt legitimate transit trade.
INTA supports fair provisions on counterfeit goods in transit as part of its anticounterfeiting strategy and has actively advocated for improvements to EU legislation in this area in a variety of ways. These include: intervening with amicus briefs in the NOKIA case against the UK Court of Appeal in 2009 and in the Nokia/Philips case at the Court of Justice of the European Union (CJEU) in 2010; supporting the Anticounterfeiting Trade Agreement (rejected by the European Parliament in July 2012); and lobbying to improve the EU Customs Regulation (adopted in June 2013) and substantive trademark legislation (adopted in December 2015).
The issue of counterfeit goods in transit remains a highly controversial matter and after years of advocacy work, we commend the successful and balanced outcome of the review of substantive trademark legislation which—in combination with the new EU Customs Regulation—allows EU national customs to stop counterfeit goods in transit. Below is a recap of some of the key moments on the road to reaching this goal.
The (In)famous “Nokia” Preliminary CJEU Ruling
This case, involving just a small consignment of fake mobile phones being sent through Heathrow Airport from a third country jurisdiction (Hong Kong) bound for another third country jurisdiction (Colombia), exposed the problem in its most dramatic manner. As confirmed by the CJEU, the UK High Court was unable to go beyond deeming such goods “fake” but not “counterfeit at law,” since at the time of the case, there existed no provision under substantive European law which expressly provided that Community trademarks or EU Member State–registered trademarks could be successfully evoked with regard to fake goods transiting the EU from one third country to another third country. In the words of Mr. Justice Kitchin (July 28, 2009):
I recognise that this result is not satisfactory. I can only hope it provokes a review of the adequacy of the measures available to combat the international trade in fake goods by preventing their transshipment through Member States.
His concerns were confirmed by the CJEU, which, on December 1, 2011, held as follows (C-495/09 and C-446/09 joining the Nokia and the Philips cases):
Goods coming from a non-member State which are imitations of goods protected in the European Union by a trade mark right or copies of goods protected in the European Union by copyright, a related right or a design cannot be classified as 'counterfeit goods' or 'pirated goods' within the meaning of those regulations merely on the basis of the fact that they are brought into the customs territory of the European Union under a suspensive procedure.
The Court went on to say that customs, however, may detain or suspend the release of goods in transit whenever they have suspicions that such goods might in fact be destined for the EU market. Such suspicions may, for instance, be grounded on the fact that the consignor cannot be identified or that the shipper is disguising commercial intentions.
In other words, counterfeit goods could be detained by customs only if there was a risk that they could enter the European Union. Otherwise, they had to let them go.
Changes to Legislation
INTA members saw an opportunity to clarify the situation created by the Nokia decision when the European Commission proposed changes to the EU Customs Regulation (EC) No. 1383/ 2003 in 2012. INTA’s Europe Office and Anticounterfeiting Committee (ACC) engaged in a robust advocacy strategy to favorably influence the text. The final draft of Regulation (EU) No. 608/2013 was adopted on June 12, 2013 (and entered into force at the start of 2014), but the EU legislature unfortunately decided that the issue of counterfeit goods in transit could not be fully handled within the Customs Regulation and that clarification was needed in substantive trademark law.
An opportunity arose to modify substantive trademark law on March 27, 2013, when the European Commission proposed draft legislation reviewing EU trademark legislation—namely the Community Trade Mark Regulation (207/2009/EC), the Commission Regulation on the OHIM fees (2869/95), and the Trade Marks Directive (2008/95/EC).The co-legislative process which followed was characterized by lengthy and complex debates in the European Parliament and in the Council, followed by a trilogue among Parliament, the Council, and the Commission in search of a compromise text. INTA staff and membership spent countless hours commenting on draft texts, proposing amendments, and lobbying the three institutions to implement effective changes in the “trademark package,” including granting power to EU customs officials to stop counterfeit goods in transit through the EU.
On April 21, 2015 the following announcement was made:
After two years of inter-institutional discussions, the Commission, the European Parliament and the Council have reached today in so-called "trilogue discussions" provisional political agreement on the trade mark reform package. … The reform will improve conditions for businesses to innovate and to benefit from more effective trade mark protection against counterfeits, including non-authentic goods in transit through the EU's territory.
In December 2015, the European Parliament approved the reform package consisting of an amended European Union Trade Mark Regulation (EU) 2015/2424 and a new Trade Marks Directive (EU) 2015/2436. The amended Regulation officially entered into force on March 23, 2016, and EU Member States have until January 15, 2019, to implement most of the provisions of the Directive into their national legislations, including those on counterfeit goods in transit.
Stopping Counterfeits in Transit—How it Will Work:
The new provisions extend the rights of the proprietor of a European Union trademark registered at Union level or of a national trademark registered at Member State level to prevent third parties from bringing, in the course of trade, into the Union without being released for free circulation, goods coming from third countries and bearing without authorization a trademark which is identical with the trademark registered with respect to such goods or which cannot be distinguished in its essential aspects from that trademark, even if the goods are not intended to be placed on the market of the Union.
To ensure the free flow of legitimate trade, the EU legislators determined that the said rights of the proprietor of an EU or national registered trademark shall lapse if during the proceedings initiated to determine whether the registered trademark has been infringed, evidence is provided by the declarant or the holder of the goods that the proprietor of the registered trademark is not entitled to prohibit the placing of the goods on the market in the country of final destination.
INTA finds these provisions to be a positive and reasonable outcome, especially given the challenging environment in which the reform was negotiated. The legislative process followed new rules derived from the Lisbon Treaty which had the unintentional consequence that negotiations among the three EU Institutions were characterized by a high level of opacity. The reform was a highly technical file but many of the debates were sidelined by political issues, such as EUIPO’s budget surplus and governance. The process was further complicated by the elections of a new European Parliament in 2014 and the appointment of a new Commission in 2014—right in the middle of the co-legislative process. In addition, the debate on counterfeit goods in transit continued being affected by the heated Anticounterfeiting Trade Agreement dossier a few years back and marred by issues which had already confused the debate on the Customs Regulation, such as the need to guarantee the free transit of generic medicines. While genuine generic medicines in transit should be able to reach their final destination, it is not a trademark issue per se but it managed to find its way into several provisions of the reform with an exceptional treatment. We need to acknowledge, however, that we were able to avoid the worst case scenario: the status quo or a codification of the Nokia case, which was advocated by a few Member States as well as some Members of the European Parliament.
Securing a balanced outcome on the EU trademark review in general and on counterfeit goods in transit provisions in particular was probably one of the most complex and lengthy files handled by INTA since the Lanham Act in the United States. This was the result of hard work of INTA members, INTA’s Europe Representative Office, and INTA’s Anticounterfeiting Manager, who closely followed and advocated for improvements at every stage of the process and whenever necessary also joined forces with other European associations.
But ultimately, INTA’s success in this endeavor is mostly thanks to its ACC, whose membership has passionately advocated for this change through five committee terms.
Implementation of the New Rules
The European Commission issued Guidelines on July 5, 2016, to EU national customs regarding the implementation of the relevant provisions in the new trademark legislation and how these will be combined with the EU Customs Regulation which entered into force at the start of 2014. INTA expresses its gratitude to the Commission’s Directorate General for Taxation and Customs Union (DG TAXUD) for taking into account its major concerns, raised jointly with other user associations.
The next step for the ACC is to work with national customs on implementing the guidelines and the provisions on counterfeit goods in transit. The ACC will focus in particular on the kind of information customs will require from brand owners so as to help customs in their risk analysis and avoid useless detentions while at the same time not reversing the burden of proof. The burden of proof should still rest on the importer to prove that the brand owner cannot prevent the placing of the goods in the country of final destination, during court proceedings. Customs should not be concerned by the situation of the goods in the country of final destination, which should be dealt with by the court during proceedings following detention.
INTA commends national customs that have already started detaining counterfeit goods in transit through the EU and will continue to take a strong stance against counterfeiting, in collaboration with the EU institutions and national authorities, to strengthen protection for brand owners and consumers alike.
For more information on counterfeit goods in transit issues in the EU or around the world, please contact INTA Anticounterfeiting Manager, Maysa Razavi, at firstname.lastname@example.org. To read more articles in this series and learn more about the EU Trademark Reform, visit our Topic Portal.
Although every effort has been made to verify the accuracy of items in the INTA Bulletin, readers are urged to check independently on matters of specific concern or interest.
© 2016 International Trademark Association