Blowing the Haughty Lid off Counterfeit Goods in International Transit
“It was just a while back ago, in 2013, to be specific, that “imports of counterfeit and pirated products amounted up to 5% of imports, or as much as 116 billion United Stated Dollars (EUR 85 billion),” says EU IPO, in its report.1 Counterfeit products not only infringe upon the sacred rights of IP holders but severely diminish the economy in general, hurting consumers with bitter fury. However, there is a grave absence of an internationally harmonized practice pertaining to the control over counterfeit products. The United Nations Office on Drugs and Crime defines the counterfeit goods business as one of the blasted blighted activities which is comparable to ignoble drug trafficking, shameful tax evasion, money laundry and abhorrent child labor exploitation in emerging economies.2 Nonetheless, the actual liberty to move goods in transit has been directly imposed by the World Trade Organization. Counterfeit trademark goods are defined as all sorts of goods, including their descriptive external appearances, which unlawfully imitate or replicate validly registered trademarks.3 The EU Law (acquis communautiare) doctrine refers to an interpretation creatively fashioned by case law of the CJEU, whereas goods suspicious of infringing upon IP rights and not produced or manufactured within the Community could be seized and charged with infringement accordingly, by considering said goods as made in the country where the customs action has been executed.4 However, this doctrine has been facially questioned and in the more recent decisions, the CJEU has officially stated that this was not an applicable doctrine.5The entire proposal for reviewing and amending the legal framework of the trademark system in Europe commenced in 2008. In December of 2015, the final text of the Regulation6 was published in the Official Journal of the European Union. The Regulation entered into force on March 23, 2016. Member States shall have up to January 15, 2023 to introduce administrative cancellation proceedings and some other fruitful provisions. The main amendments implemented by the new legal framework can be listed as thus: an exclusion of the requirement of graphical representation (hence, the sense of smell and the sense of sound marks may be registered under EU law); there shall be no extensive interpretation of the listed goods under the class headlines; there shall exist new grounds of refusal; technical exclusions shall emerge; there will be protection of Geographical Indications; bad faith shall be forbidden; there shall be an acquired distinctiveness; there shall be a relative ground for refusal; there shall be infringement procedures and enforcement in place as safeguards; and most importantly, there shall be particular, distinct measures against counterfeit goods, customs actions shall be taken against goods in transit and there will be a Fair use defense—limitations and defenses. It has been quite clear from previous yet related Regulations prescribed by the European Union7 that border measures against counterfeit goods and pirated goods were available in accordance with the international obligations set by the TRIPS Agreement. It was furthermore clear that the interpretation of such provisions was not in any way shape or form—uniform, regrettably, and thus there has been an absence of much needed alignment as a cure. As pertaining to the goods suspected of infringing IP rights, in particular to those very goods deemed as counterfeit and in addressing the egregious acts of piracy—four main legal instruments are now applicable. These four legal instruments relate to Intellectual Property rights but are not exclusive. Under the European Union, the relevant legislation is: (a) Regulation (EU) No 2015/2424 amending the previous community trademark regulation No 207/2009, (b) Directive No. (EU) 2015/2436 amending the previous trademark directive 2008/95 (c) Regulation No. 608/2013 concerning customs enforcement of intellectual property rights and repealing Council Regulation (EC) No 1383/2003 and (d) Regulation (EEC) No 2913/92—The Community Customs Code. Two main international agreements are relevant when analyzing the particularities of infringing goods in transit: (a) the TRIPS agreement, and (b) the GATT agreement. In opposition to the positive application of TRIPS regarding border measures and the possibility of seizing goods in transit, the GATT Agreement lucidly represents a limitation to the scope of enforcement of IP rights. More than that, the applicability of border measures in the honorable fight against goods in transit, was developed in numerous case law. The first two relevant cases, Polo Lauren8 and Rolex9 pointed towards an extensive interpretation of Regulation No. 1383/2003 (at the moment know as Regulation No. 3295/94).“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 be obliged to apply the same sanctions on the transit of counterfeit goods as on other trademark infringements.”10 In opposition, in a case decided in 2003, Rioglass and Transremar (Case C- 115702), the Court claimed that no trademark infringement will exist without the risk of the goods being placed in commerce in the same territory where the valid trademark was enforceable. This restrictive view was shared in Class Intl v. Colgate Palmolive Co9 (Case C-405/03) and later on in Montex Holdings Ltd v. Diesel SpA, where the CJEU maintained its position on “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.”11
In December 2009, two seminal cases were addressed in the European Court of Justice for preliminary ruling, namely, joint cases C-446/09 and C-495/09. Despite the fact that both cases entailed different circumstances and posed differing questions to the CJEU, the substantive matter was so closely related that the Court decided to give its opinion under the same ruling. This decision is now commonly known as the Nokia/Philips Decision, granted the parties involved. “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”9. The goods were suspected of infringement and seized by the customs authorities. When assessing the question related to the infringement of counterfeit goods in transit; the Rechtbank van eerste aanleg te Antwerpen (Court of First Instance) sought CJEU assistance in ascertaining if the applicable law, in relation to intellectual property, was in fact relatable to one of the Member States where the action had transpired, regardless of the transit status of the goods. “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 latest European case law, Montex/Diesel. 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.” Nokia then appealed the decision. Upon deciding the case, the Court of Appeals of England and Wales referred a question to the CJEU, inquiring about the applicability of Regulation No. 1383/2003 to goods in transit from a non-member state to another non-member state and what specifically would constitute counterfeit goods. In addition, the Court of Appeals also inquired as to whether there was a need for evidence suggesting the allocation of the goods within the internal market. So the CJEU released two governing criteria derived from these two cases: (a) the effective possibility of detaining fakes in transit without the need of incidental proof that goods are going to be placed in the internal market and (b) there is still a viable valid defense available for the defendant to somehow show and prove that the goods will not infringe any IP rights in the country of final destination. There are always two avenues which remain a staple whence resolving such disputes: (a) to support the Customs Authorities and to detain suspected counterfeit goods and (b) alas, method (a) remains an unnecessary use or abuse of power that belongs to the jurisdiction of the judicial branch. From the IP user’s perspective, the new adoption of the Regulation and the Directive when policing goods in transit, enacts a remedy against the interpretation of the Court in Nokia/Philips allowing the prosecution of well-versed hooligans, better known as culprit trademark infringers.
In any case, these bold regulations most definitely signify a progress towards a certain pertinent rationality of CJEU jurisprudence. In general, it appears that the reforms of Trademark law regulation and the attempt to curtail the counterfeit transit of goods in the European Union is a positive step in the right direction. It is evident that the road is paved with obstacles, thus looming problems shall arise either way, as there is simply no clear perfectly exquisite solution in resolving the conflict of interests between trademark holders serving as the guardians of the holy grail of their rights and the freedom sought by a sustainable yet ebbing trade.
The latest report was published on April 18, 2016 and can be accessed on-line at EUIPO.↩
Trafficking of Counterfeit Goods and Transnational Organized Crime. Available at http://www.unodc.org/documents/counterfeit/FocusSheet/Counterfeit_focussheet_EN_HIRES.pdf [https://perma.cc/UFN9-HT9U].↩
A specific definition of counterfeit trademark goods can be found in footnote 14 lit. (a) of article 51 of the TRIPS agreement. In addition, EU Regulation No. 608/2013 under Article 2 paragraph 5 also defines counterfeit goods.↩
Case C-383/98, The Polo/Lauren Co. LP v. PT Dwidua Langgeng Pratama Int’l Freight Forwarders, 2000 E.C.R. I-02519.↩
Joined Cases C-446 & 495/09, Koninklijke Philips Elcs. NV v. Lucheng Meijing Indus. Co. Ltd., and Nokia Corporation v Commissioners of Revenue and Customs,  ECR, I-124435.↩
Regulation (EU) 2015/2424 of the European Parliament and of the Council of 16 December 2015 amending Council Regulation (EC) No 207/2009 on the Community trade mark and Commission Regulation (EC) No 2868/95 implementing Council Regulation (EC) No 40/94 on the Community trade mark, and repealing Commission Regulation (EC) No 2869/95 on the fees payable to the Office for Harmonization in the Internal Market (Trade Marks and Designs) OJ L 341, 24.12.2015, p. 21–94.↩
REGULATION (EU) No 608/2013 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 12 June 2013 concerning customs enforcement of intellectual property rights and repealing Council Regulation (EC) No 1383/2003.↩
Case C-383/98, Polo Lauren,  ECR I-2519 supra note 9.↩
Case C-60/02, Rolex and Others,  ECR I-665, Colgate Palmolive Co.↩
Dorothee Altenburg. Transit of Counterfeit Goods in the EU: What’s the Effect of Philips and Nokia?↩
Nokia? INTA Bulletin. November 1, 2012 Vol. 67. No. 19. Available at http://www.inta.org/INTABulletin/Pages/TransitofCounterfeitGoodsintheEUWhat%E2%80%99stheEffectofPhilipsandNokia.aspx [https://perma.cc/B9X9-JUAA].↩