For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

Regular round-ups of the previous week's blogposts are kindly compiled by Alberto Bellan.

Thursday, 1 December 2011

When is a fake not a fake? When it's not on sale in Europe ...

"How can they do this to me ...!"
This morning the Court of Justice gave its ruling in Joined Cases C 446/09 Koninklijke Philips Electronics NV v Lucheng Meijing Industrial Company Ltd, Far East Sourcing Ltd, Röhlig Hong Kong Ltd, Röhlig Belgium NV and Nokia Corporation and and C 495/09 Nokia Corporation v Her Majesty’s Commissioners of Revenue and Customs, International Trademark Association intervening. These are a couple of extremely controversial references from, respectively, the Rechtbank van eerste aanleg te Antwerpen and from the Court of Appeal (England and Wales). The Advocate General's Opinion (noted here by the IPKat) was given as long ago as 3 February, which means that the Court of Justice has been agonising over what to do for nearly twice as long as it usually does. Those poor judges must really have had their serenity shattered, says Merpel.

Today's ruling is 8,500 words in length and will take a bit of digesting. Merpel kindly suggested that the IPKat begin reading from the start while she begins reading from the end, so they can meet in the middle. While that's not as silly an idea as it seems, since the basic law and facts are at the beginning and the ruling is at the end, the Kats agreed that the best point from which to start was the excellent Curia media release, which states as follows:
"The Court specifies the conditions under which goods coming from non-member States that are imitations or copies of goods protected in the EU by intellectual property rights  may be detained by the customs authorities of the Member States 
Where those goods are in customs warehousing or in transit in the EU, they can be classified as ‘counterfeit’ or ‘pirated’ goods if it is proven that they are intended to be put  on sale in the EU 
These two cases concern the interpretation of the EU rules on the conduct of customs authorities faced with possible infringements of intellectual property rights by goods coming from non-member States that are placed in external transit or customs warehousing on the customs territory of the EU [From a technical legal perspective this is true. But IP owners aren't concerned about the conduct of customs authorities -- they're concerned about the conduct of people who are shifting fakes and counterfeits around, under their very noses]. Those suspensive procedures enable non-Community goods to avoid being subject to import duties and other taxes or to commercial policy measures. 
The facts in Case C-446/09
In 2002, the Belgian customs authorities inspected a cargo – which lacked a stated destination and was warehoused in the port of Antwerp (Belgium) – of electric shavers from Shanghai (China) resembling designs of shavers developed by Philips. Those designs are protected by registrations granting exclusive intellectual property rights to Philips in a number of States, including Belgium. Suspecting that the goods were ‘pirated goods’, the Belgian customs authorities detained them. 
Philips brought an action against Lucheng Ltd, Far East Sourcing Ltd and Röhlig Hong Kong Ltd, which were involved in the manufacture, marketing and transport of those shavers .... Philips seeks in particular a ruling that those undertakings infringed its exclusive right over those designs. Philips also seeks an order that those undertakings pay it damages and that the detained goods be destroyed. 
The facts in Case C-495/09
In July 2008, the customs authorities of the United Kingdom (HM Revenue & Customs, ‘HMRC’) inspected a consignment of goods – mobile telephones and mobile telephone accessories – at London Heathrow Airport (United Kingdom) which had come from Hong Kong (China) and was destined for Colombia. Those goods bore a sign identical to a Nokia trade mark. Suspecting that the goods were fake, HMRC sent samples to Nokia, which confirmed that the goods were indeed fake and asked HMRC to detain the consignment. 
That request was refused by HMRC on the ground that goods in transit from one non-member State to another cannot be regarded as ‘counterfeit goods’ for the purposes of European Union law and therefore cannot be detained. Nokia challenged that refusal of detention before the courts of the United Kingdom. 
[The referring courts] ask the Court of Justice whether goods coming from a non-member State which are in transit or stored in a customs warehouse in the European Union, can be classified as ‘counterfeit goods’ or ‘pirated goods’ for the purposes of European Union law merely on the basis of the fact that they are brought into the customs territory of the European Union, without being marketed or sold there. 
In its judgment delivered today, the Court first examines the conditions for temporary detention of goods placed under a suspensive procedure. It reiterates that goods from non-member States 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, those rights may be infringed where, during their placement under a suspensive procedure in the customs territory of the European Union, or even before their arrival in that territory, goods coming from non-member States are the subject of a commercial act directed at European Union consumers, such as a sale, offer for sale or advertising [The IPKat didn't think that the advertising or offering for sale of infringing goods that were not yet on EU territory was an issue in this case]. 
In addition to the existence of such a commercial act, other circumstances can also lead to temporary detention by the customs authorities of the Member States. Thus, a customs authority which has established the presence in warehousing or in transit of goods which are an imitation or a copy of a product protected in the European Union by an intellectual property right can legitimately act when there are indications before it that one or more of the operators involved in the manufacture, consignment or distribution of the goods, while not having yet begun to direct the goods towards European Union consumers, are about to do so or are disguising their commercial intentions. 
Such indications may include the fact that the destination of the goods is not declared whereas the suspensive procedure requested requires such a declaration, the lack of precise or reliable information as to the identity or address of the manufacturer or consignor of the goods, a lack of cooperation with the customs authorities or the discovery of documents or correspondence concerning the goods in question suggesting that there is liable to be a diversion of those goods to European Union consumers. Such suspicion must, in all instances, be based on the circumstances of each particular case [While the need for each suspensive detention to be considered on its own merits is obviously important when determining whether customs authorities have acted unlawfully, it is helpful for IP owners and customs authorities alike to receive clear guidance in terms of broad principle as to whether a suspensive detention is appropriate or not, if they are to make decisions and carry them out under what can be severe pressure of time and without necessarily having all the information they need in their possession and in a form and language which they can conveniently understand]. 
Secondly, the Court specifies the material which the competent authorities must have before them in order to ascertain that goods already detained infringe European Union intellectual property rights. Thus, the Court considers that goods in respect of which it is not proven, after substantive examination, that they are intended to be put on sale in the European Union cannot be classified as ‘counterfeit goods’ and ‘pirated goods’ [So if it is clear that the fake goods are 100% destined for a non-EU jurisdiction like Colombia, they're not counterfeit or pirate at all.  How fortunate for the consumers in the destination market! And how miserable for the IP rights owners, who may find their prospects of exporting to those markets destroyed, along with their credibility and their goodwill].
Certain evidence enables such an infringement to be proved, including, in particular, the existence of a sale of goods to a customer in the European Union, of an offer for sale or advertising addressed to consumers in the European Union, or of documents or correspondence concerning the goods in question showing that diversion of those goods to European Union consumers is envisaged. 
Finally, the Court states that, in the absence of proof of infringement of an intellectual property right, goods placed under a suspensive procedure in the European Union can, as appropriate, be seized in other situations covered by the European Union Customs Code, such as where the goods in question pose a risk to health and safety [What a crumb of comfort ...]".
The full wording of the active part of today's ruling reads like this:
"Council Regulation ...3295/94 ..., as amended by Council Regulation ... 241/1999 ... concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights must be interpreted as meaning that: 
– 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; 
– those goods may, on the other hand, infringe the right in question and therefore be classified as ‘counterfeit goods’ or ‘pirated goods’ where it is proven that they are intended to be put on sale in the European Union, such proof being provided, inter alia, where it turns that the goods have been sold to a customer in the European Union or offered for sale or advertised to consumers in the European Union, or where it is apparent from documents or correspondence concerning the goods that their diversion to European Union consumers is envisaged; 
– in order that the authority competent to take a substantive decision may profitably examine whether such proof and the other elements constituting an infringement of the intellectual property right relied upon exist, the customs authority to which an application for action is made must, as soon as there are indications before it giving grounds for suspecting that such an infringement exists, suspend the release of or detain those goods; and 
– those indications may include, inter alia, the fact that the destination of the goods is not declared whereas the suspensive procedure requested requires such a declaration, the lack of precise or reliable information as to the identity or address of the manufacturer or consignor of the goods, a lack of cooperation with the customs authorities or the discovery of documents or correspondence concerning the goods in question suggesting that there is liable to be a diversion of those goods to European Union consumers".
Readers may gain the impression that the IPKat is not entirely happy with this ruling. He can't blame the court since it is required to interpret and apply the law before it. He very much hopes that the proposed reforms of the EU's suspensive detention laws, discussed at length in an excellent article by Olivier Vrins (Altius) in the November 2011 issue of the Journal of Intellectual Property Law and Practice (JIPLP), "The European Commission's proposal for a regulation concerning Customs enforcement of IP rights", will correct the deficiencies of policy and functionality which so adversely affect the current system.

The full text is promised here, but at the time of posting this piece only the Advocate General's Opinion was available on the Curia's smart, new and totally unfamiliar InfoCuria website. In the meantime you can read it in full, in English, here.

7 comments:

Anonymous said...

What happens, though, when the EU rightsholder is not a rightsholder in the source or destination states?

Why should a party having rights only in Europe (let's say, as in the cited Nokia case, a trade mark) be able to prevent two parties in two other states, potentially having a legitimate right to use the mark in their respective states, doing business and sending the goods via the EU.

Hence, this ruling is a perfectly reasonable ruling, and it is up to the rightsholders, if any they be, in the source and destination states to uphold their rights in those states, preserving the concept of territoriality of state-granted monopoly rights.

Anonymous said...

Well, IP rights are territorial by nature.

If something is not destined to the EU market, EU IP rights don't apply to it.

There are no "universal" IP rights, they are just temporary economic monopolies granted by the state (in the case of trademarks, for the purpose of identifying goods or services in respect of the identity of who provides them).

Unless we abolish nation-states or the EU, there's no reason to complain about this ruling.

Don't forget that in a free market system, we have the fundamental freedom to copy, unless a state-imposed monopoly (IP rights) says otherwise.

Anonymous said...

Anonymous of 2:27 - fundamental freedom to copy? I think you mean fundamental ability to copy. Both freedoms and restrictions are constructs of a society; abilities are what remain when you take these out. One has a freedom when a society guarantees you an ability to do something; one has a restriction when a society prevents you from doing something. What is intrinsic to you is the ability only. Can I copy? Of course I can. May I copy? Depends what society permits.

Put another way, rights and responsibilities all flow from an internal or external ethics; take this away, and you have only abilities.

Anonymous said...

With respect, the editorial comments are somewhat insulting to the source and destination jurisdictions. If you believe that only Europeans are capable of dealing with the infringement of IP rights, please say so.

Having been peripherally involved in the seizure of generic medicines in Europe - where there was no suggestion of infringement of any right in either the source or destination country - the ruling seems eminently sensible to me. If fakes are discovered in transit, surely the information can be passed on to the authorities in the relevant jurisdictions? If there is infringement in a jurisdiction where the goods are actually present (legally, i.e. other than in transit), the issue can be dealt with there.

Matthew said...

To take a slightly different slant. Is it only me, or do these European rulings give us all a timely reminder of the value of attacking counterfeiters at source? I hope so. Because I am in the process of finalising such a reminder, in fuller form - in the shape of an article for the JIPLP on Chinese Customs as an alternative and a possibly better way of dealing with global trade in counterfeit goods - infringing goods that end up at, or passing through, European shores. So yes, although the rulings are probably disappointing for (European) brand owners, isn't it a case of reallocating resources to further up the food chain (which would be better anyway)? Rather deliciously, China is an anagram of chain.

Anonymous said...

The basic and most important function of a trademark is to identify its source/ maker TO THE BUYING PUBLIC. And the fake goods are a danger to the BUYING public IF they have been advertised/ offered for sale to public in EU.

Here, there was no representation / offer of sale of such 'fake' goods made to any buying citizens of EU.

So, what was the 'hurt' to the EU citizens??

While on the other hand, we - as practitioners / people in the pharmaceuticals business professionals from India - have a legitimate grouse against Directive 1383 and its current implementation of seizing our generic medicines NOT destined for European markets.

I understand the rationale of the judgment and am in full agreement with this part of the judgment:
"those goods may, on the other hand, infringe the right in question and therefore be classified as ‘counterfeit goods’ or ‘pirated goods’ where it is proven that they are intended to be put on sale in the European Union, such proof being provided, inter alia, where it turns that the goods have been sold to a customer in the European Union or offered for sale or advertised to consumers in the European Union, or where it is apparent from documents or correspondence concerning the goods that their diversion to European Union consumers is envisaged"

Anonymous said...

Rightly or wrongly the judgment simplifies matters for customs authorities.

If there is suspicion that an infringment may occur then the goods can be detained to allow the right holder to investigate and take whatever corrective action they deem fit.

If it is very clear that there is little risk of diversion (as will probably be the case for transhipments) then goods are unlikely to be stopped.

For more complex transit movements or goods moving through a customs warehouse there is a greater risk so more prospect of a detention. Of course the ball is then in the right holder's court (literally and figuratively).

A final solution to this lies in persuading the law makers that Europe should not be a transit camp for fake goods

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