1. Klaus Haft Attorney and Physicist Patent protection and handling of patent disputes at customs in Europe EU-China Training Course on Administrative Patent Enforcement 1 September 2009 - Tongji University, Shanghai

2. Content A. Introduction B. Overview on proceedings C. Details on customs seizures D. Particularities concerning trade fairs E. Defences and remedies F. Conclusion Privileged and Confidential2

3. A. Introduction I. General - Customs seizures provide effective measure in protecting IP rights -Traditionally strong background in enforcement of trademarks -In recent years growing number of applications based on patents -In the EU 43 % of all detained articles found to infringe patents in 2008 Privileged and Confidential3

4. A. Introduction I. General - Statistics German Statistics 2005: –Top 5 countries of origin of seized products: China35,80 % Hong Kong11,45 % USA11,23 % Thailand10,20 % Turkey 8,73 % Privileged and Confidential4

5. A. Introduction I. General – Statistics (cont’d) German Statistics 2008: –Top 5 countries of origin of seized products: China28,57 % USA18,52 % Thailand 17,33 % Hong Kong 8,15 % India 5,23 % Privileged and Confidential5

6. A. Introduction II. Legal basis - Europe -Under European Community law, intervention of customs authorities governed by Council Regulation (EC) No 1383/2003 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 (hereinafter referred to as the 1383 Regulation) -Provisions for implementation laid out in Council Regulation (EC) No. 1891/2004 -Amended by Council Regulation (EC) No. 1172/2007 Privileged and Confidential6

7. A. Introduction II. Legal basis – Europe (cont’d) Regulation (EC) No 1383/2003 applies on entry, export and re-export into/from EC (Art. 4, 1, 2) of the following: Counterfeit (trademarks) and pirated (copyright, design) goods Patent / supplementary protection certificate infringing goods National or Community plant variety rights infringing goods Designations of origin or geographical indications infringing goods Privileged and Confidential7

8. A. Introduction II. Legal basis – German national law Additional national implementation provisions found decentralized in individual laws concerning protection of intellectual property rights, e. g.: -Section 142a German Patent Act (PatG) -Section 150 German Trademark Act (MarkenG) -Section 11c Copyright Act (UrhG) -Section 57a Design Act (GeschmMG) -Section 40b Plant Varieties Protection Law (SortenG) National laws (theoretically) apply on: Goods in free circulation (in the European Union moving between Member States) Non registered trade marks Utility models and protected semiconductor products Privileged and Confidential8

9. A. Overview on proceedings I. European Law Proceedings following the 1383 Regulation twofold: - ex officio measures (w/o formal request) - measures upon application Privileged and Confidential9

10. B. Overview on proceedings I. European law (cont‘d) Suspension of release / detention of goods without formal request of IPR owner (Art. 4 EC) - by customs authorities -upon their discretion prior to application of right- holder - if sufficient ground for suspicion of infringement - for 3 working days - little relevance for patents Privileged and Confidential10

11. B. Overview on proceedings I. European law (cont‘d) Application for action to central customs authority of Member state (Art. 5 (1), (4) EC; Zentralstelle Gewerblicher Rechtsschutz OFD Nürnberg, located in Munich) –Use EC-wide standardized application forms (Art. 5(5)): Information regarding the protected right, holder, contact persons (e.g. lawyers); no administrative charges –Sign declaration re: liabilities and costs if IPR are not infringed (Art. 6) Privileged and Confidential11

12. B. Overview on proceedings II. German proceedings Basic proceeding parallel to 1383 Regulation 3 Steps: application, seizure, release or destruction: - application filed with central customs authority - seizure / detention of goods in import / export situations - based on „evident / obvious“ infringement - applicant is given opportunity for inspection of detained goods - importer may oppose within two weeks following notifictaion - in case of opposition, applicant must iniate national proceedings Privileged and Confidential12

13. B. Overview on proceedings III. Relation of proceedings Community law provisions in their area of application take precedence over the national provisions National protective provisions only apply: - when mere national action is required and EU law leaves room, e.g. utility models, unregistered trademark rights - to the extent that controls take place in internal trade Privileged and Confidential13

14. C. Details on customs seizures I. Application phase Application usually accepted for maximum period of one year (Art. 8 (1)) Announcement to all local authorities where the goods supposedly cross the border (Art. 8 (2)) by means of Customs Intranet Seizure by local customs authority Privileged and Confidential14

15. C. Details on customs seizures I. Application phase (cont‘d) Application for seizure in several or all Member states, Art. 5 (4), if: Community Trademark Registered Community Design Community Plant Variety Right Protected Designation of Origin or Protected Geographical Indication Privileged and Confidential15

16. C. Details on customs seizures I. Application phase (cont‘d) Advantage of Art. 5 (4): –Apply for action by customs authorities of several or all Member states by only one request –Request is valid for 1 year and renewable –Good experiences according to customs authorities in Germany, France, UK, Spain, Italy, Netherlands, Poland, Finland, Austria Privileged and Confidential16

17. C. Details on customs seizures I. Application phase (cont‘d) Application must contain all relevant information needed to enable the goods in question to be readily recognised, Art. 5 (5) Customs do not conduct legal assessment regarding patent infringement; detention/seizure on suspicion alone Thus, provision of detailed information (e.g. characteristics of original vs. counterfeit product, info on trade channels, means of transportation, specific shipment etc.) essential Privileged and Confidential17

18. C. Details on customs seizures I. Application phase (cont‘d) Sole description of product may be sufficient (e.g. SISVEL: all mp3-players) Black and white lists very helpful (e.g. all shipments from one known infringer; none of known licensees) Customs maintain Intranet database with information provided Customs authorities generally accept training from IP-right holder Privileged and Confidential18

19. C. Details on customs seizure II. Seizure phase 1.General practice –If goods suspected to infringe IPR are identified, right- holder is informed on kind and amount of such goods (Art. 9), as well as – upon request - addresses of sender, recipient, declarant, holder, owner, origin of goods etc. –Then: obligation Of IPR owner to initiate legal procedure (or of good owner to agree on destruction of goods; however, corresponding fast track procedure not reduced to practice in Germany) within 10 (20)working days (Art. 13) (perishable goods : 3 working days) Privileged and Confidential19

20. C. Details on customs seizure II. Seizure phase (cont‘d) 2. Level of evidence - Following Art. 5 application, customs take action if suspicion established that IP right is infringed by particular goods; sufficient precondition „predominant likelihood“ of infringement - German proceedings following sec. 142a Patents Act require higher level: obvious property right infringement - As corrective for low standard, the1383 Regulation requires IP right holder to accept liability in case no IPR is infringed by signing declaration, Art. 6 Privileged and Confidential20

21. C. Details on customs seizure II. Seizure phase (cont‘d) 3.Seizure scenarios - (EC) No.1383/2003 applies to any type of entry, export and re-export into/from European Union - Transit of goods generally not deemed a patent infringement according to German case law (e.g. Federal Court of Justice (BGH), GRUR, 1957, 321 – Taeschner/Pertusin) - Position subject to criticism: Transit also bears danger that goods, in contrast to initial purpose, are being introduced to national market - European Court of Justice (ECJ) ruled in re Polo Ralph Lauren/Dwidua and Rolex that transit of pirated trademark material constitutes infringement - Hamburg District Court adopted ECJ rule for patents; German Appelate Courts do not follow Privileged and Confidential21

22. C. Details on customs seizure II. Seizure phase (cont‘d) 4. Simplified proceedings -Art. 11 of the 1383 Regulation provides for a simplified procedure for destruction -requires consent of declarant, holder or owner of suspended goods -consent presumed if declarant, holder or owner does not specifically oppose destruction within ten days after notification - simplified procedure has little relevance with respect to patent infringing goods Privileged and Confidential22

23. C. Details on customs seizure II. Seizure phase (cont‘d) 5.Main proceedings - regarding main infringement proceedings, Art. 10 of the 1383 Regulation refers to national law of the Member States - Standard procedure: initiation of patent infringement proceedings with the competent national courts for establishment of infringement - However, German national law requires an enforcebale court decision submitted within two or maximum four weeks, sec. 142a (4) German Patent Act - Hence, according to European law proceedings on merits must be initiated, while German national law relies on interlocutory relief. Privileged and Confidential23

24. C. Details on customs seizure III. Release of goods 1.Release of goods on provision of security (Art. 14) overview: -IPR: design right, patent, supplementary protection certificate or plant variety -Legal procedure initiated within 10 days -Customs formalities completed -Provision of security (sufficient to protect interests of right-holder) Privileged and Confidential24

25. C. Details on customs seizure III. Release of goods (cont‘d) Art. 14 details: proceedings After: - both sides notified of suspension of release, - opposition gaginst simplified destruction was filed, - proceedings for establishing infringement werde duly initiated, - all customs formalilties have been completed the declarant, owner / holder of detained goods may apply for release upon provision of security Application for release gives rise for „urgency“ required for interim injunction of IP right-holder Privileged and Confidential25

26. C. Details on customs seizure III. Release of goods (cont‘d) Art. 14 details: amount of security - following Art. 14 (2), security must be „sufficient to protect right- holder‘s interest - such interest typically is twofold: monetary interest (damages, exemption of legal/court fees) IP right holder‘s interest to cut off infringements - customs authorities need to consider the above said - actual amount is set by assessment of customs; in Germany following sec. 287 Civil Procedure Code Privileged and Confidential26

27. C. Details on customs seizure III. Release of goods (cont‘d) 2.Release of goods (Art. 13): -Within 10 (20) days of receipt of notification of seizure -No legal procedure started -No right-holder‘s agreement to destruction of goods according to simplified procedure -Completion of all customs formalities Privileged and Confidential27

28. C. Details on customs seizure IV. Criticism -Complexity of patents makes dissatisfactory that suspension/detention is undertaken on grounds of suspicions/obviousness -Compensation for easy suspension/detention necessary -Two possibel approaches: 1.possible encroachment for potential infringer should be accounted (e.g. are goods presumably trade fair goods and will detention put fair attendance at risk?) 2.release for security quick (within hours) without further requirements Privileged and Confidential28

29. C. Details on customs seizure IV. Criticism (cont‘d) Customs seizures regime should be amended Currently danger of misuse due to lack of substantial infringement control Establishment of suspected property right infringement should be left to specialised courts Privileged and Confidential29

30. C. Details on customs seizure V. Damages / unjustified seizures The 1383 Regulation does not specifically provide regime for damages Art. 6 of the Regulation requires applicant to sign declaration accepting liability for the event that: –Procedure iniated pursuant Art. 9 (1) is discontinued owing to an act or ommission of the right-holder, –the goods in question are subsequently found not to infringe IPR Privileged and Confidential30

31. C. Details on customs seizure V. Damages / unjustified seizures (cont‘d) Art. 19 (3) of the 1383 Regulation stipulates that liability of applicant / right-holder shall be governed by law of individual member states In Germany unjustified detention and possibel destruction of goods triggers claim to compensation Compensation regurlarly is restitution; monetary damages also possible The latter may include attorney‘s fees and other expenses associated with unjustified detention Privileged and Confidential31

32. C. Details on customs seizure VI. Licensing negotiations Border Seizures may be (and are) used for creation of leverage for licensing negotiations or settlement of pending proceedings Of particular relevance in case of standard related IPR where FRAND/antitrust law based claims would otherwise help to lower royalty rates Privileged and Confidential32

33. D. Particularities concerning trade fairs I. Ex ante measures Create clear position for evidence by registering IP-right Application for border measures with the Central Customs Office Additionally, helpful to contact local Customs Office responsible for trade fair Provide detailed information with application; submit original product Appropriate evidence is necessary for showing infringement; bring evidence to trade fair: –Submission of original documents or certified copies of certificates for patent, trademark, registered design or utility model is necessary Privileged and Confidential33

34. D. Particularities concerning trade fairs II. Measures taken at fair If IPR is infringed right-holder may typically request signing of cease and desist letter or request a court order for preliminary injunction Above measures often unsatisfactory, e. g. time consuming, not effective, too slow Privileged and Confidential34

35. D. Particularities concerning trade fairs II. Measures taken at fair (cont‘d) Border Seizure Procedures are particularly useful for measures on trade fairs Customs may collect all suspicious goods for inspection by IPR owner (including catalogues) before opening of the fair Significantly higher efficiency than just relying on preliminary injunction proceedings Privileged and Confidential35

36. D. Particularities concerning trade fairs II. Measures taken at fair (cont‘d) 1.Former approach: - before fair opened, customs allowed for inspection of goods at customs‘ premises, provided Art. 5 application was filed - upon notice of IP right-holders seizure was undertaken - practice now abandonded because assembly of fair booths was significantly aggravated / delayed Privileged and Confidential36

37. D. Particularities concerning trade fairs II. Measures taken at fair (cont‘d) 2.Current approach: - Local Customs Offices offer inspection of fair (including individual booths) before opening; Prosecution authorities not involved - Such inspection not governed by statutes; discretion of local Customs Office (e.g. Düsseldorf reluctant, Frankfurt apt to) - Reserved to IP right-holders who had filed Art. 5 application - Seizure undertaken upon notice of applicant in order to gain evidence for criminal proceedings Privileged and Confidential37

38. D. Particularities concerning trade fairs II. Measures taken at fair (cont‘d) 2.Current approach: - Seizure comprehensive; including catalogues but not booth - If such seizure is undertaken, applicant must initiate criminal proceedings - Approx. 2 days after seizure, follow-up inspection - New approach proves succesful: attenuation of consequences for aggrieved party, avoidance of undesired publicity Privileged and Confidential38

39. D. Particularities concerning trade fairs III. Example case DRUPA 2008 example –DRUPA world’s largest printing equipment exhibition every 4 years in Düsseldorf – X and Y, two non EU companies producing printing machines, engaged in several patent litigations –Ex ante: Y filed Art. 5 application for parts of printing machine which X wanted to exhibit at the DRUPA Privileged and Confidential39

40. D. Particularities concerning trade fairs III. Example case DRUPA 2008 example (c’ted) –At fair: infringing parts of X’s printing machine were confiscated by customs at DRUPA before opening –Customs rejected X’s motion to immediately release machine parts; release date set was after end of DRUPA –X then applied for interlocutory injunction obligating Y to consent to release of detained machine parts –court turned down motion Privileged and Confidential40

41. D. Particularities concerning trade fairs III. Example case DRUPA 2008 example (c’ted) –Y in turn obtained interlocutory injunction prohibiting X exhibition of machine parts; in addition court ordered for machine parts to be handed out to bailiff acting as sequestrator –Customs authorities gave machine parts to the sequestrator –X could not exhibit machine parts at DRUPA; proceedings on the merits confirmed infringement Privileged and Confidential41

42. E. Defences and remedies I. For the applicant Appeal according to national law -Regulation (EC) No 2913/1992 establishing the Community Customs Code: -Appeal (Art. 243) -Procedure determined by Member States (Art. 245) -No suspensive effect (Art. 244) -In Germany: -Sec. 347 German Fiscal Code -Objection within 1 month -No suspensive effect -Without practical relevance Privileged and Confidential42

43. E. Defences and remedies II. For declarant, holder or owner No defence or remedy against application for customs action; before action is taken, no need for legal relief on behalf of declarant, holder or owner of goods Following suspension / detention declarant, holder or owner may appeal Appeal can only be based on procedural errors Establishment of IPR infringement reserved to main proceedings according Art. 10 of the Regulation No interest for legal relief before expiration of Art. 13 period After expiration, declarant probably will easier achieve release against security than by way of preliminary injunction Privileged and Confidential43

44. F. Conclusion Effective, strong and cheap means for IPR-holders “sharp blade” Release for security options need to be enhanced for patent seizures Appeal means need to be enhanced Privileged and Confidential44

45. www.rokh-ip.com45 Thank You! Steinstr. 20 Tel. +49 (0)211 550 22 0 40212 DüsseldorfFax +49 (0)211 550 22 550 Germany Klaus.Haft@rokh-ip.com