On December 1, 2012, the Court of Justice of the European Union (CJEU) issued its highly anticipated judgment on the cases brought by Nokia Corporation and Philips Electronics that addressed the role of customs authorities in intercepting counterfeit goods in transit.
case dealt with the question of whether, under EU Council Regulation 1383/2003, customs authorities have the power and indeed obligation to detain and subsequently seize fake goods that originated in a non-EU member state and are in transit through an EU member state (in Nokia
, the United Kingdom) en route to another non-EU member state.
In July 2008, the UK Customs body HM Revenue & Customs (HMRC) had stopped and inspected at Heathrow Airport a consignment of goods being shipped from Hong Kong to Colombia, transiting through the UK. The shipment consisted of mobile handsets bearing NOKIA trademarks (pictured). Customs officials had sent samples to Nokia, which were determined to be counterfeit. Nokia subsequently asked HMRC to seize the goods pursuant to its powers under the European Council Regulation 1383/03 (Counterfeit Goods Regulation).
HMRC took the view that the goods were not “counterfeit” within the meaning of the Counterfeit Goods Regulation as there was no evidence that the goods might be diverted onto the EU market. In the absence of such evidence, HMRC did not believe it would be lawful to deprive the owner of its goods.
Nokia filed an application for judicial review against HRMC in October 2008, which was ultimately transferred to the Chancery Division of the High Court of Justice of England and Wales, which denied Nokia’s application. Nokia was then granted permission to appeal to the UK Court of Appeal, which resulted in a hearing in November 2009.
At this stage, INTA submitted an amicus brief
to the UK Court of Appeal. The Association was highly concerned that if HMRC’s judgment was upheld and the transshipment of counterfeit goods through the UK (or any EU member state) from one non-EU country to another could not be prevented under the EU Council Regulation 1383/2003 without evidence of likely diversion onto the EU market, there would be significant adverse effects for trademark owners.
In its amicus submission, INTA encouraged the UK Court of Appeal to refer the case to the CJEU to clarify the status of counterfeit goods in transshipment under the Regulation.
Shortly thereafter, the Court of Appeal did refer the case to the CJEU and asked for clarification on the question:
Are non-Community goods bearing a Community trade mark which are subject to customs supervision in a Member State and in transit from a non-member State to another non-member State capable of constituting “counterfeit goods” within the meaning of Article 2(l)(a) of Regulation [No 1383/2003] if there is no evidence to suggest that those goods will be put on the market in the [European Community], either in conformity with a customs procedure or by means of an illicit diversion?
In its referral, the UK Court of Appeal named INTA as a party to the case and granted the Association formal leave to intervene in the subsequent CJEU hearing. This was a milestone for INTA, as it marked the first time INTA could intervene
independently before the CJEU—all prior INTA amicus interventions had been included within the submissions of another party (normally in the form of an annex).
The oral argument
was heard in November 2010 in Luxembourg. In the proceedings, INTA was represented by Matthew Harris (Waterfront Solicitors LLP—UK) and Nicholas Saunders (Brick Court Chambers—UK), the chair and a member of the Association’s Europe Amicus Aubcommittee.
In January 2011, the First Chamber of the CJEU joined the Nokia case with the Koninklijke Philips Electronics NV case also pending before the Court and involving customs/transit issues.
The Advocate General’s opinion was delivered in February 2011, in which a distinction was noted between “customs action against goods suspected of infringing certain intellectual property rights” (i.e., preliminary seizure) and “the measures to be taken against goods found to have infringed such rights” (i.e., final determination of the status of the goods). It was noted that, in the case of seizures, suspicion that the goods in transit may be placed on the market may be sufficient to stop and seize a shipment. Suspicion would include “the greater or lesser difficulty of identifying the consignor of the goods or the lack of information on their physical destination or consignee.”
On December 1, the Court issued its final ruling, sparking much analysis and debate as to what the decision means for trademark owners.
The ruling noted that, following from Articles 91, 92 and 98 of the Customs Code:
the transit and customs warehousing procedures are respectively characterised by the movement of goods between customs offices and the storage of goods in a warehouse under customs supervision. On any view, those operations cannot, as such, be regarded as the putting of goods on sale in the European Union…. The Court has repeatedly deduced from that fact that goods placed under a suspensive customs procedure cannot, merely by the fact of being so placed, infringe intellectual property rights applicable in the European Union.
However, the Court did note there is a risk that transiting goods or goods being warehoused in the customs territory of the European Union may be fraudulently diverted to European Union consumers and cited member states’ acknowledgement that there are circumstances in which the destination of the goods “is either unknown or declared in a manner which is unreliable.”
Crucially, the Court noted that customs can legitimately act when there are indications that one or more of the operators involved in the manufacture, consignment, or distribution of potentially infringing goods are disguising their commercial intentions, even if the goods have not yet been directed towards EU consumers.
Although the ideal outcome for brand owners would have involved the Court overruling or finding a way around some of its previous judgments, so as to extend the notion of “counterfeit” goods under the Regulation to goods in transit, this was always unlikely. Viewed in that light, INTA welcomed the ruling and was pleased to see the Court expressly recognize the serious threat that counterfeiting poses to consumer health and safety and the rights of brand owners. While the Court has provided guidance as to when customs may intervene to detain shipments of counterfeit or pirated goods, there is room for further discussion as to the consequences of this ruling.
The goods in transit issue continues to be a hotly debated topic in the context of the revision of the Customs Regulation 1383/2003, a draft of which was released in mid-2011. It remains to be seen how the responsibilities of customs and trademark owners may be delineated in the future, on both the judicial level (the Nokia
case will now return to the UK Court of Appeal) and by way of the EU legislative process. INTA has been and will continue to engage with policymakers and legislators to ensure that policy and procedures in the European Union address counterfeit goods in transit.
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.
© 2012 International Trademark Association