The involvement of European customs authorities with articles suspected of infringing intellectual property rights (IPR) such as trademarks, copyrights or patents is increasing year by year. Statistics published on a regular basis by the European Commission registered around 80,000 cases of shipments suspected of violating IPR in 2010, which is almost double the number for 2009. The figure represents more than 103 million products the release of which was suspended at the European external border; a substantial part of these goods derived from online sales and postal traffic. Their domestic retail value was estimated at more than 1.1 billion euro. In terms of number of detained goods, the top three categories were cigarettes (about a third of all articles), office stationery (about 8 percent of all goods) and other tobacco products (about 8 percent). In terms of cases, the top three categories were clothing (more than a quarter of all cases), shoes (almost 20 percent) and other electrical equipment (14 percent). (See “ Report on EU Customs Enforcement of Intellectual Property Rights—Results at the EU Border – 2010
Since July 1, 2004, the legal basis for customs’ interceptions has been Council Regulation (EC) No. 1383/2003 (“Counterfeit Goods Regulation” or “Regulation”). The Regulation replaced Council Regulation (EC) No. 3295/94, as well as the first border measures regulation of the European Community (Council Regulation (EEC) No. 3842/86), which served as a model for the provisions in Part III, Section 4, Articles 51–60 of the TRIPS Agreement. The Counterfeit Goods Regulation exceeds the provisions laid down in TRIPS to a large extent.
Council Regulation (EC) No. 1383/2003—Essential Provisions
The Counterfeit Goods Regulation sets out the conditions for an action by customs authorities when goods are suspected of infringing IPR and specifies the measures to be taken when the goods are found to infringe.
Article 2, paragraph 1(a) of the Regulation defines “counterfeit goods” as “(i) goods, including packaging, bearing without authorisation a trademark identical to the trademark validly registered in respect of the same type of goods, or which cannot be distinguished in its essential aspects from such a trademark, and which thereby infringes the trademark-holder’s rights under Community law…; (ii) any trademark symbol…, even if presented separately, on the same conditions as the goods referred to in point (i); (iii) packaging materials bearing the trademarks of counterfeit goods, presented separately, on the same conditions as the goods referred to in point (i).”
Article 3, paragraph 1 explicitly exempts parallel imports and overruns produced by a licensee outside the scope of an existing or past license agreement from application of the Counterfeit Goods Regulation. An exemption (set forth in Article 3, paragraph 2) also applies to small consignments in travelers’ personal baggage.
Article 11 of the Regulation allows European Union member states to provide, in accordance with their national legislation, for a simplified procedure enabling customs authorities to have detained goods abandoned for destruction under customs’ control without there being any need to determine whether an IPR has been infringed under national law. In this case the rights holder must inform customs authorities within a certain term (10 working days; 3 working days in the case of perishable goods) that the detained goods infringe its IPR and provide them with a written consent of the declarant or the owner of the goods to abandon the goods for destruction. Such consent shall be presumed to be given when the person in charge has not specifically opposed destruction within the prescribed period. Destruction shall usually be carried out then at the expense and under the responsibility of the rights holder.
The following 15 EU member states have adopted national provisions for a simplified procedure in their trademark laws: Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Germany, Hungary, Ireland, Lithuania, Portugal, Romania, Slovakia, Slovenia and Spain.
In the United Kingdom, a similar proceeding is applied by customs, whereas Greece, the Netherlands and Latvia apply Article 11 of the Counterfeit Goods Regulation directly (regarding the application of the Regulation in Greece and Cyprus, see “Customs Border Measures Around the Mediterranean, Part II
,” INTA Bulletin
Vol. 66, No. 2, Jan. 15, 2011).
Countries such as France and Italy, however, have not, up to this point, applied Article 11 directly, nor have they adopted a respective provision into their national laws.
Transit of Counterfeit Goods
In numerous cases, the EU is transit territory. Because of their central position and excellent traffic facilities, a major part of the commerce between Europe and the Far East is conducted through the North Sea ports of Antwerp, Rotterdam and Hamburg. According to the Counterfeit Goods Regulation, customs authorities of the EU member states are entitled to take action when goods crossing the EU’s external borders are suspected of infringing IPR, irrespective of whether the consignment is only in transit or in transshipment through the EU Customs territory.
(Case C-383/98, Apr. 6, 2000) and Rolex
(Case C-60/02, Jan. 7, 2004) were the first cases in which the Court of Justice of the European Union (CJEU) had to address such a situation. In its decision in Polo Lauren
, the CJEU confirmed that the Counterfeit Goods Regulation was also applicable to cases of transit. In Rolex
, the Court suggested that national trademark law must be interpreted in accordance with European law to the effect that national courts would have to apply the same sanctions on the transit of counterfeit goods as on other trademark infringements. In a later decision, Montex/Diesel (
Case C-281/05, Nov. 9, 2006), the CJEU performed an about-face, denying trademark infringement exists if the counterfeit goods are in an external transit procedure from a member state where no trademark protection exists to a non-member state. As already confirmed in Class International
(Case C-405/03, Oct.18, 2005), the CJEU held that, under harmonized trademark law, goods in transit do not infringe upon the exclusive rights of a trademark owner unless the owner can demonstrate that the goods are intended to be put on the market in the country in question, and the onus of proving interference lies with the rights holder who alleges it.
“Manufacturing Fiction” Doctrine
There was debate, however, about whether the Counterfeit Goods Regulation contained a “manufacturing fiction,” whereby, for the determination of their infringing character, goods stopped by customs at the EU’s external borders must, in all cases, be considered as having been produced in the member state of the customs action. It was argued that the above case law of the CJEU was irrelevant, as all goods falling under the scope of the Regulation simply had to be regarded, by way of a legal fiction, as goods produced in the member state where the customs action took place. The provision first developed under Article 6, paragraph 2b of Regulation 3295/94 had been transferred into the Eighth Recital of Regulation 1383/2003, with the following wording: “Proceedings initiated to determine whether an intellectual property right has been infringed under national law will be conducted with reference to the criteria used to establish whether goods produced in that Member State infringe intellectual property rights.…”
Philips and Nokia
In its judgment in the recent cases Philips
(Joined Cases C-446/09 and C-495/09, Dec. 1, 2011), the CJEU finally dismissed this “manufacturing fiction” doctrine.
In Philips, Belgian Customs had detained a shipment of shavers coming from China that had been declared under a temporary importation arrangement without stating a country of destination. The Antwerp Court of First Instance had confirmed copyright and design right infringement in applying the “manufacturing fiction.” In Nokia, U.K. Customs had detained a shipment of Chinese cell phones in transit to Colombia but had refused to seize the goods in view of the European case law mentioned above. As Nokia could not provide evidence that the goods would be diverted onto the EU market, customs decided to release the goods. The release was confirmed by the High Court of England and Wales, Chancery Division. The Court of Appeal (like the Antwerp court) referred to the CJEU for a preliminary ruling the question whether it was necessary to have evidence that the goods were going to be diverted onto the EU market. INTA submitted both written
submissions to the CJEU, advocating the position that the EU Counterfeit Goods Regulation is intended to permit local customs authorities to seize counterfeit goods that are in transit but not intended for sale in a member state
In accordance with its previous judgments, the CJEU confirmed that non-Community goods in transit through the EU cannot, merely by the fact of being so placed, infringe IPR applicable in the EU. However, the Court found that those rights may be infringed where, during their placement under the transit procedure in the EU Customs territory or even before their arrival in the territory, non-Community goods are the subject of a commercial act directed at EU consumers, such as a sale, offer for sale or advertising (for a summary of the judgment, see INTA Bulletin
Vol. 67, No. 1, Jan. 1, 2012).
According to the CJEU, an offer for sale or advertising addressed to consumers in the EU, or documents or correspondence concerning the goods in question showing an intention to divert the goods to EU consumers, will be sufficient to establish proof of such a commercial act. The Court stated that the national courts would need to decide the issue on a case-by-case basis with reference to the specific indication that might suggest that the goods were actually bound for the transit member state or the EU market.
The CJEU also emphasized that the term “evidence” was not meant in a procedural way, but rather that a “suspicion” would suffice, in terms of an imminent risk that the goods might in fact infringe an IPR. As a consequence, customs may legitimately act even if the destination of goods is not declared, as such declaration is mandatory, or there is a lack of reliable information as to the identity or address of the manufacturer or consignor of the goods.
According to this recent case law of the CJEU, EU member states may take action with respect to goods in transit that are suspected of infringing IPR, without establishing any requirement for such an infringement. Once customs has taken action under the Counterfeit Goods Regulation, it is up to the courts of the member states to decide, on the basis of national law, whether the goods indeed infringe an IPR. However, as a result of the Nokia case, practitioners in some EU member states have found that customs will not exercise its power to stop goods in transit under the regulation.
It will be very important, therefore, for rights holders in future cases to collect as much evidence as possible demonstrating that there was a plan to distribute the goods in the country where they were detained.
The Regulation is currently under review, and it is unclear whether it will bring about a substantial reform of the current legal system. Despite recommendations submitted by INTA (see comments
compiled by the Anticounterfeiting Committee’s EU Subcommittee on behalf of INTA on May 20, 2010), the proposal for a new regulation concerning customs enforcement of IPR tabled by the European Commission on May 24, 2011 (COM(2011)285) removes the explicit prohibition of transshipment of counterfeits and does not include the manufacturing fiction. On the other hand, the draft regulation, among other things, enlarges the scope of infringements of IPR by parallel trade and introduces a simplified procedure for counterfeit and pirated goods and for small consignments. The legislative proposal is currently in the final stages of the EU co-legislative procedure between the European Parliament and Council, and it remains to be seen the extent to which further recommendations to address the current gap in enforcement against suspected counterfeits in transit and to reverse the burden of proof of rights holders submitted by INTA will find their way into the final text (see comments
compiled by the European Union Subcommittee of the Anticounterfeiting Committee on behalf of INTA, August 2011.
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