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A green light for counterfeit goods

A green light for counterfeit goods

This article was included in the winter 2011/12 issue of snIPpets - the intellectual property newsletter.

Philips and Nokia joined cases: C-446/09 and 495/09

Customs may only seize counterfeit transit goods if there is any indication that they are to be sold in the European Union

The joined cases

In the joined cases, the Court of Justice of the European Union (CJEU) had to decide on the detention of transit products.

In the first case, (a reference by the English courts) Her Majesty's Revenue and Customs (HMRC) at London Heathrow airport detained a consignment of mobile telephones with the description "Nokia". The telephones were in transit in the UK from Hong Kong and were on their way to Columbia according to the customs documents. The customs officers detained the mobile phones and sent samples to Nokia. Nokia confirmed that they were counterfeit products and applied for their detention. HMRC refused to continue to detain them or suspend their release on the basis that Nokia had not proved that the products were to be released onto the European market. Transit products which are transported from one non-EU country to another non-EU country via the EU are not considered as "counterfeit products" according to EU law. Nokia applied for judicial review of HMRC's refusal to continue to detain the goods and the judge held that as the mobile phones had not been put on the market in the UK, they were not 'counterfeit  goods' within the meaning of the relevant legislation. Nokia appealed to the English Court of Appeal and the Court of Appeal referred questions to the CJEU on the criteria to be applied for detaining allegedly counterfeit goods.

In the second case, (a reference by the Belgian courts) Belgian Customs and Excise intercepted shavers from Shanghai at Antwerp harbour with an unspecified destination. The devices looked similar to the Philips' shavers. Customs assumed that they were "unauthorized manufactured products" and detained them. Philips then filed a main action against the companies involved with the manufacture, supply and shipment of the shavers, inter alia on the grounds of design infringement. Philips claimed compensation for damages and requested destruction of the shavers.

The decision

The ECJ differentiated in the connected cases between the conditions necessary to obtain detention of counterfeit goods and the conditions necessary to prove infringement of intellectual property rights.

The case of Nokia dealt with only the conditions of detention. According to the counterfeit goods regulations, there must be definite grounds for suspicion that the confiscated goods infringe intellectual property rights within the EU. According to the CJEU, sufficient grounds include circumstances which conceal the true commercial purposes of the involved parties, i.e. if reliable information is missing regarding the purpose and recipient of the goods. However, a ground for suspicion may not be based on a general assumption that the transit goods are regularly directed to the EU in a deceiving manner. Such a general suspicion would hinder legitimate commerce.

On the other hand, in the Philips case, it had to be decided whether the transit goods detained by customs did in fact infringe intellectual property rights within the EU. The judges held that European customs proceedings were not alone sufficient for that purpose. Rather it must be proven that the detained goods were to be sold in Europe. This could be done using sales documents, offers or advertising for customers in the EU.

In practice

The judgment provides more legal certainty for brand owners and customs: The CJEU has now clarified for the first time under which conditions customs may detain suspicious goods in transit: Inconsistencies with the customs application are sufficient conditions for the detention. However, the fight against product piracy has not yet been won. A further argument put forward by brand owners that goods in transit are to be regarded as infringing per se, was not shared by the CJEU. In legal proceedings, the manufacturer of the original goods must prove in every single case that the import of counterfeit goods in the EU is imminent. Brand manufacturers should therefore issue proceedings regarding suspicious goods only if definite indications regarding the import are evident. They should bear in mind that they have the option to prevent the release of illegitimately declared goods until the true purposes of the involved parties have been clarified.

Jakob Guhn is a partner in the IP Enforcement and Litigation group in the Düsseldorf office of Fieldfisher.