Important changes to procedures for dealing with importation of counterfeit goods

Please find below a summary of the recent changes to the UK customs procedures in relation to the seizure and destruction of goods suspected of infringing copyright and trade mark rights.

Historic Procedure

By way of background, until 22 June 2009, the procedure was, briefly, as follows:-

  • The intellectual property rights owner (the "rights owner") i.e. the brand, placed ‘watch' notices / IP applications with customs authorities, along with intelligence for identifying counterfeit items.

  • The customs authority detained goods which were suspected of infringing intellectual property rights.

  • The rights owner (or authorised representative) was informed of the detention, and the rights owner then confirmed that the goods were infringing by way of a declaration / witness statement.

  • The declaration was lodged with customs, and the goods were automatically seized and destroyed.

  • The only instance in which the infringing goods were not automatically seized and destroyed was if the importer objected. In practice this was a rare occurrence as the importer was usually aware that the goods were counterfeit and therefore did not challenge the seizure.

  • If the importer objected to the seizure, it was required to make a judicial challenge and the matter was referred to a customs hearing. Pending the outcome, the goods remained in secure storage.

It was decided that the historic procedure as set out above was not fully compliant with Article 13 of Council Regulation 1383/2003 (the "Council Regulation"), and that the regulation should be directly applicable. As such, a new procedure has been introduced for dealing with suspect infringing goods.

New Procedure for Import of Counterfeit Goods

The main change is that the burden of proof has shifted to the rights owner to confirm the infringing nature of the goods by initiating legal proceedings seeking a court declaration that the goods are infringing.

The new procedure, in brief, is as follows:-

  • The rights owner places a ‘watch' notice / IP application with the customs authority, along with intelligence for identifying counterfeit items.

  • The customs authority detains goods which are suspected of infringing intellectual property rights.

  • The rights owner (or authorised representative) is informed of the detention.

  • The rights owner then ordinarily has only 10 days from the notification of the detention in which to initiate court proceedings against the importer, failing which, the suspect goods will be released from detention.

  • Goods will then only be destroyed if the rights holder obtains a judgment and the court makes such an order.

Notification of Detention

In accordance with Article 9 of the Council Regulation, upon the detention of suspect goods, the case officer of the customs authority will contact the rights holder (or nominated representative) with the requisite information required to decide whether an intellectual property right has been infringed.

Under Article 9, customs informs the rights holder and the holder of the goods, of the detention. The department is authorised to inform the rights holder of the actual or estimated quantity, and the actual or supposed nature of the detained goods.

In accordance with national provisions, the customs department shall inform the rights holder at his request, if known, of the names and addresses of the consignee, the consignor, the declarant or holder of the goods, and the origin and provenance of the goods detained.

The customs office shall also provide the rights holder with the opportunity to inspect the detained goods. When examining the detained goods, the customs office may take samples and according to the rules in force in the member state concerned, may hand them over to the rights holder, at its express request, strictly for the purposes of analysis.

Initiating Proceedings

By virtue of the Council Regulation, in order to comply with the 10-day time limit, a claim must be issued. The customs authority will then need to see a copy of the sealed claim form in order to show that the matter has been placed before the courts.

Extension of the Detention Time

To maintain the detention of the suspect infringing goods beyond 10 working days, the rights holder must either initiate proceedings, or reach an agreement with the declarant, holder or owner of the goods to abandon the goods. It is possible for an extension of a further 10 working days to be obtained. However, the extension is not automatically granted, and so a request must be made.
The detention period cannot exceed 20 working days in the absence of court action.
One of the ways to ensure that the initial 10 day period is extended is to initiate the simplified procedure.

Simplified Procedure

By virtue of Article 11 of the Council Regulation, provision should also be made for a more flexible procedure allowing infringing goods to be destroyed without there being any obligation to initiate proceedings.

Article 11 provides that member states may provide, in accordance with their national legislation, for a simplified procedure to be used with the right holder's agreement, which enables customs' authorities to have such goods abandoned for destruction under customs control without there being any need to determine whether an intellectual property right has been infringed under national law.

National legislation has not yet been introduced to implement this in the UK, however, in its absence, customs authorities will apply the Article in the following manner:-

  • Upon receiving the notice from customs that the suspect goods have been detained, the rights holder may seek the permission of the declarant, holder or owner of the goods to abandon the goods.

  • The agreement should be in writing, and must be communicated to the case officer. It may be communicated to customs by the rights holder or the declarant, holder or owner of the goods.

The time periods set out in Article 11 and Article 13 run concurrently.

The European Commission (as provided in Regulation 1891/2004) agree that first seeking disposal of the matter under a simplified procedure is a reasonable justification for extending the initial 10 working day period, to a maximum of 20 days.

Destruction

Destruction will be carried out at the expense of the rights holder.

Transition Period

If an action has already been started under the old procedure then it will continue to be processed under the old procedure, and if appropriate, goods will be seized. However, right holders who seek an extension of time should use that period to initiate court proceedings. In the absence of a court order, goods will not be seized and destroyed for breach of an intellectual property right after Friday 3 July 2009.

Practical Points to Note

In practical terms, the new procedure will mean that upon notice of a detention of suspect infringing goods at customs, each brand will only have a maximum period of 20 days in which to react. This is a short amount of time and so procedures will need to be in place to enable the brand to act quickly.

The brand will need to consider the cost of initiating proceedings, which will depend upon the value of the claim. If the claim were for between £5,000 and £15,000 then the cost to initiate the claim in the county court would be £225. Further, in order to then apply to the court for an injunction, there would be the further cost to seek non-monetary relief, in the sum of £150. This would total £375 just to issue the claim based on the value above. In addition, there will be the substantial legal fees which would be incurred in dealing with the proceedings.

Clearly, dealing with the importation of counterfeit goods will become a massively expensive process and once infringers become aware of the new process, they will no doubt simply reduce the size of each consignment (whilst increasing the number of consignments) knowing that it will not be financially viable for rights holders to issue proceedings against them for a small seizure of counterfeit goods. Furthermore, counterfeit goods are often imported using false details making proceedings even more futile.

Although there is a simplified procedure provided, it may be difficult to reach agreement with the importer of the infringing items within 20 days. This would depend on a variety of factors, including whether contact details are fully accurate, and it also relies on the co-operation of the importer.

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