Waiting For Customs And Trademark Reforms, EU Rights Owners Get “Proactive” Against Fakes

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Alicante, Spain – The impact of counterfeit goods on the economy, public health, and the bottom line was a central theme during a private-sector symposium on trademarks here this week. For European rights owners, the border is where counterfeiters are at their weakest and therefore the best place to act. But as stronger legislation regarding infringement of intellectual property rights on goods in transit is unlikely for now, the private sector is seeking alternative ways to take on a growing business threat.

On the heels of last week’s Pan-European Intellectual Property Summit devoted to patents, its sister conference on trademarks was organised in partnership with the Office for the Harmonization in the Internal Market (OHIM) – the EU trademarks and designs office – and held from 10-11 December in Alicante, where OHIM is located.

Related IP-Watch article: Single European Patent Dominates IP Summit As European Parliament Vote Nears

As the EU is in the midst of reforming key customs and trademark regulations, trademark owners discussed challenges they face when it comes to protecting their IPR in the EU. One of the greatest concerns raised during the two-day conference was how to stop fakes passing through the EU.

Enforcing IPR on goods in transit is a prickly political and legal issue, which trademark owners want to see sorted in this next wave of legislation. On 10 December, the Council of Ministers endorsed a new European Customs Action Plan [pdf] to combat IPR infringements for 2013-2017.

It’s the latest piece of policymaking to come out related to the way forward on dealing with IPR infringement in the EU. It will accompany new customs regulations currently being reviewed by the European Parliament and expected to become legislation in early 2013.

The European Commission submitted the customs reform proposal [pdf] in May 2011.

Additionally, the Commission made a proposal to reform EU trademark law, which was supposed to be approved this month, but has been postponed until March 2013, The postponement was largely due to the goods and transit issue, according to legal experts.

Fakes at the Border

For trademark owners and government authorities, the goal is the same: keep counterfeit goods out of the EU market. According to a recently released European Commission report [pdf], from 2009 to 2011, border seizures jumped from 44,000 to 91,000.

In an intervention at the trademark summit, Antonis Kastrissianakis, director of security and safety, trade facilitation and international coordination, directorate general for taxation and customs union at the European Commission, put those numbers into context.

“Based on the equivalent domestic retail value of genuine products, the 2011 detentions were valued at nearly 1.3 billion euros. 93 per cent of this related to counterfeit goods. Yet, it is probably only a fraction of what really comes in,” Kastrissianakis said.

The government authority pointed to the important role customs plays in stopping the fakes. “I would focus on the indispensible, indeed, critical role of customs as a gatekeeper in keeping counterfeit and other IPR infringing groups out of the EU,” he said. “We should not forget, once such goods have made it into the EU market, it is far more difficult, burdensome, and costly to remove them.”

One of the key elements of the EU border IPR enforcement strategy is “re-deploying our domestic capacity, our legislation and administrative tools,” according to Kastrissianakis.

The new customs regulations are expected to deal with customs infringement generally, but not how to address infringing trademark goods that are transiting through the EU. Therefore, trademark practitioners hope that the issue will be taken on in reforms to trademark law. However, according to legal experts, it is unlikely that the changes will satisfy trademark owners.

They would like to see the capacity of customs to stop fakes transiting through Europe strengthened. In the landmark Philips and Nokia case (2011), the European Court of Justice consolidated previous rulings and confirmed that goods in transit do not inherently infringe upon the rights of a trademark owner. It is incumbent on the trademark owner to prove that the goods are intended for sale in the EU.

“Legal Limbo”

Ronald Brohm, director of React, a non-profit anti-counterfeiting organisation for industry, said that the ruling is burdensome for businesses and that new customs regulation should address IPR infringement on goods in transit.

React issued a statement [pdf] on 11 November suggesting that the Commission put the onus of proof on the goods owner rather than on the trademark owner. Additionally, it suggests that customs should inform officials at the final destination “that goods suspected of infringing intellectual property rights are due to arrive at a specified Customs port of entry.”

César Galcerán, brand protection manager at Nike in Spain, said, “One of the most critical issues that threaten our ability to protect our intellectual property, in particular our trademark rights in Europe, is the need to resolve the legal limbo of goods in transit,” said César Galcerán, brand protection manager at Nike in Spain.

“I think the understanding should be, if goods are found in a specific place, this is what you should analyze, not what could happen in the future, or where the goods will end up. Today, the regulation is not clear enough on protecting goods in transit and stopping them in the place you find them,” Galcerán told Intellectual Property Watch.

Double Infringement

However, Michael Hawkins, solicitor at NOERR, an IP firm in Alicante, said that while he recognises that brand owners think the situation is “crazy,” the question is legally complicated.

“To infringe a trademark you need to use the mark in the course of trade in the territory in which it is protected. If I have a consignment of counterfeit goods that are held in a warehouse in Rotterdam and will be shipped to Somalia, the right owner can say that they have a Community or Benelux trademark, therefore it’s an infringement, but in reality these goods may never enter, or even be intended to enter, the market in the EU,” Hawkins told Intellectual Property Watch.

He suggests that a way forward for rights holders in such circumstances may be to demonstrate a double infringement, by proving that they have rights both in the territory where the goods are warehoused and in the final destination. “There are strong calls to introduce the ability for right owners to act at least in such cases, rather than having to wait to take action in the final destination” Hawkins said.

This idea may be consolidated in upcoming reforms to European trademark legislation. “The question is whether the legislators codify the Court’s rulings or take the bolder step of introducing such a mechanism for action, providing that counterfeit goods in transit the trademark is protected in the country where they are found and in the country of final destination,” said Hawkins.

Hawkins suggested that the legislator could even reverse the burden of proof, putting the obligation on the alleged counterfeiter to prove that there is no infringement in such circumstances.

However, Hawkins was doubtful that in practice this “double test” would by itself do away with the transit of counterfeit goods through the EU.

“Counterfeiters usually never declare their true commercial intentions,” he said. “It is often the case that a declared final destination is a simple pick-up point for onward transit. Counterfeiters could also choose destinations where the right owner has no enforceable rights. The EU legislators therefore need to continue to fight this issue on an international level.”

A Proactive Approach?

In the meantime, many trademark owners are seeking alternative avenues to stop fakes of their products passing through the EU. Olivier Vrins, partner at the IP firm Altius in Brussels, said that these issues represent about 30 per cent of his clients’ concerns. He recommends that his clients take a more proactive approach.

“It is still possible do something about transit by strengthening international cooperation between customs. Either you say, ‘it’s not my problem, I can’t do anything about it,’ or you try to be more proactive and to establish relationship between the right holder and customs and customs authorities worldwide,” Vrins told Intellectual Property Watch.

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Rachel Marusak Hermann may be reached at info@ip-watch.org.

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