Counterfeits & Transit

David Butler

Overview

How are goods imported and stored?

What is transit?

How do counterfeiters “use” transit?

WCO/EU figures

Regulation 1383/2003

Facts in the Nokia case

Case law - Class International, Montex, Polo, Rolex

Article 1(1)(b) and the Recitals

Manufacturing Fiction – Sisvel

Nokia’s appeal

Philips reference

The future?

Port of Liverpool

One of UK & N. Europe’s major container ports

Handles more than 700,000 TEUS (20ft container units) per year

Planned expansion (1,500,000 TEUS)

Liverpool Freeport - UK’s largest free zone (3 million square feet of warehousing)

Serves more than 100+ non-EU destinations

“ideally located for re-distribution throughout the UK/EU and third country destinations”

Source: Peel Ports Group

Top 20 World Ports by Throughput - 2008

Customs Procedures

Release into free circulation:

– Declaration filed– Formalities e.g. submit invoice– Make goods available for inspection– Pay import duties– Check as to compliance with health regulations

Inward processing

Outward processing

Processing under customs control

Temporary import

Storage of goods

Type of Storage

Temporary storage premises Intended for the short-term storage of goods under customs control

Customs warehouse Intended for the long-term storage of goods under customs control. Physical control by Customs may be partly replaced by an audit of the warehouse keeper's accounts.

Free warehouse / free zone Store for unlimited period of time

Transit of goods

The shipment of goods to an intermediate destination, and then from there to yet another destination

– Change of means of transport e.g. ship to road

– Combine small shipments into one large shipment

– Break down one large shipment into smaller shipments

External transit

Internal transit

World’s Busiest Transit Ports

Source: Drewry 2004

How do counterfeiters “use” transit?

Counterfeiters try to conceal the true country of export:– Use several transport routes

– Use several modes of transport

– Use free trade zones

No conventional or consistent network

Change the route used

Use counterfeiting “hubs” e.g. CDG, Antwerp, Dubai, Hong Kong

Counterfeiters take advantage of customs territories where border enforcement for in transit goods is known to be weak

Ability to stop transit goods crucial

Large consignment at border vs small quantities in market

No guarantee that consignment will be identified and detained at final destination

Prevent potentially harmful products entering distribution chain

Customs detention = opportunity to identify manufacturing source

OECD Update Survey

$200 billion (2005) $250 billion (2007)

1.85% of world trade (2000)

1.95% of world trade (2007)

Source: OECD Magnitude of Counterfeiting & Piracy of Tangible Products: An Update – November 2009

Source: WCO Customs & IPR Report - 2008

Cases: 14,981 +77%

Articles: 371m+316%

Origin Unknown: 4,993 cases

Departure Unknown:

3,289 cases

Destination Unknown:

1,132 cases

Source: WCO Customs & IPR Report - 2008

Transit: 3,111 cases

21%

Transit >2: 306 shipments

Transit >3: 52 shipments

Shipments using transit routes:

46% seized at final destination54% intercepted en route

Top 10 Transit Countries - Seizures

Country Seizures

Germany 854

Netherlands 445

France 222

Hong Kong, China 146

Norway 121

Spain 115

Romania 110

Belgium 82

Bulgaria 79

Chile 64

Poland 61

Source: WCO Customs & IPR Report 2008

Cases: 49,381+13%

Articles: 179m+126%

Applications: 12,866

Source: Report on EU Customs Enforcement of IPR - 2008

Provenance Unknown:

3.02%

Origin Unknown:

9.89%

Source: Report on EU Customs Enforcement of IPR - 2008

Cases: 90% under import

procedure; 7% in transit

Articles: 43% under import

procedure; 42% in transit

Source: Report on EU Customs Enforcement of IPR - 2008

Cases: +57%Articles: +118% Medifake:

32m stopped; 15% infringed IPR;50% under import

procedure;26% in transit;

21% in re-export;6% based on patent93% based on TM

(25% were in transit)

Counterfeits & Transit

Arty Rajendra

Rouse

• Community goods and non-Community goods

• Non-Community goods must be assigned Customs-approved treatment

• Such procedures include:• Release for free circulation• Suspensive procedures=transit

Community Customs Code

• “Counterfeit Goods Regulation” (CGR)• “Anti-Piracy Regulation” (APR)• Purpose• History

– 3842/86 (1986)– 3295/94 (1994)– 1383/2003 (2003)

Regulation 1383

Regulation 1383

Definition of ‘counterfeit goods’:Goods... bearing... a trademark identical to the trademark.. 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.

• Customs check goods entering into UK territory

• Customs notify rights holder and send sample of suspect goods

• Rights holder verifies status of sample• Customs seize goods if ‘counterfeit’• Goods forfeited for destruction

How Regulation 1383 worked in the UK

The UK Customs policy

Staff should cease to target or detain goods suspected of infringing intellectual property rights of goods in transit/transhipment absent evidence of a likely diversion onto the UK or wider EU market.

Class International (2005)

• Infringement under the Trade Marks Directive

• Proprietor cannot oppose mere entry into the EU of goods under external transit

• Infringement only if goods are being put on the EU market

Class International (2005)

Montex (2006)

Montex (2006)

• Infringement under the Trade Marks Directive

• Trade mark owner does not have right to prohibit the mere transit of goods

• Infringement requires evidence that importer engaged in acts aimed at putting goods on the EU market

Regulation 1383

Definition of ‘counterfeit goods’:Goods... bearing... a trademark identical to the trademark.. 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.

Polo (2000)

Polo (2000)

• CGR was expressly designed to apply to goods in transit

• Risk that goods fraudulently brought back into the EU

Rolex (2004)

Rolex (2004)

• Counterfeit Rolex watches intercepted by Austrian Customs

• No criminal provisions prohibiting transit• CGR applies to transit

Regulation 1383

• Recital 3 - Counterfeit goods under suspensive procedure, i.e. transit, should be prohibited

• Article 1(1)(b) - Goods can be found on checks when under suspensive procedure i.e. transit

• Recital 8 – use criteria to establish whether goods produced in that Member State would infringe

• Manufacturing Fiction deployed in Sisvel (Case Number 311378 Court of the Hague)

Manufacturing Fiction

Regulation 1383

Definition of ‘counterfeit goods’Goods... bearing... a trademark identical to the trademark.. 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.

“Are non-Community goods in transit capable of constituting “counterfeit goods” within the CGR if there is no evidence to suggest that those goods will be put on the market in the EC, either in conformity with a customs procedure or by means of an illicit diversion.”

Nokia reference

• consignment of 7,000 shavers from China to no designated destination

• intercepted by Antwerp Customs• Chinese shipper challenges detention

relying on Montex• Philips rely on Manufacturing Fiction

Facts in Philips case

• relates to Regulation 3295/94 • relates to all IP rights• should the court take into account the

temporary storage status/the transit status and apply the legal fiction that the goods were manufactured in that same Member State when assessing infringement?

Philips reference

• Request for Nokia reference to be joined with Philips reference

• INTA amicus intervention• INTA’s Observations filed March 2010• Customs’, Member States’ and Nokia’s

Observations due to be filed

Next steps

The Future ?

ECJ has to rule:

– Policy considerations– Position of Member States?– Position of Commission?– Follow Class / Montex or Polo / Rolex?

Amendment to 1383/2003?

Amend Trade Marks Directive?

ACTA?

TAXUD / EFPIA Joint Statement

2. It is important to respect the right of Customs Authorities to control goods in transit and ensure that measures can be taken against global trade in pharmaceutical products suspected of infringing IPR

4. European Customs Authorities will pay particular attention to cases involving the transit of medicines through the Community Customs Territory

IMPACT – Lisbon 2007

Responsibilities

Government responsibilities include, but are not limited to, the following:

3.1. establish an adequate legal basis (including criminal, administrative and civil frameworks) for imposing, ensuring compliance with, and enforcement of obligations of all concerned parties;

3.2. ensure that this legal basis can be applied to all medical products, including those that may be counterfeit medical products, and/or in transit/trans-shipment, bonded warehouses, free trade zones, and all situations of the international trade

Illegal acts:

It is prohibited to:

4.2. own, possess or control counterfeit medical products in transit, trans-shipment, free trade zones, bonded-warehouses and other situations of international commerce