Counterfeits & Transit David Butler

Overview How are goods imported and stored? What is transit? How do counterfeiters use transit? WCO/EU figures Regulation 1383/2003 Facts in the Nokia case Case law - Class International, Montex, Polo, Rolex Article 1(1)(b) and the Recitals Manufacturing Fiction – Sisvel Nokias appeal Philips reference The future?

Port of Liverpool One of UK & N. Europes major container ports Handles more than 700,000 TEUS (20ft container units) per year Planned expansion (1,500,000 TEUS) Liverpool Freeport - UKs largest free zone (3 million square feet of warehousing) Serves more than 100+ non-EU destinations ideally located for re-distribution throughout the UK/EU and third country destinations Source: Peel Ports Group

Top 20 World Ports by Throughput

Customs Procedures Release into free circulation: –Declaration filed –Formalities e.g. submit invoice –Make goods available for inspection –Pay import duties –Check as to compliance with health regulations Inward processing Outward processing Processing under customs control Temporary import

Storage of goods Type of Storage Temporary storage premisesIntended for the short-term storage of goods under customs control Customs warehouseIntended for the long-term storage of goods under customs control. Physical control by Customs may be partly replaced by an audit of the warehouse keeper's accounts. Free warehouse / free zoneStore for unlimited period of time

Transit of goods The shipment of goods to an intermediate destination, and then from there to yet another destination –Change of means of transport e.g. ship to road –Combine small shipments into one large shipment –Break down one large shipment into smaller shipments External transit Internal transit

Worlds Busiest Transit Ports Source: Drewry 2004

How do counterfeiters use transit? Counterfeiters try to conceal the true country of export: –Use several transport routes –Use several modes of transport –Use free trade zones No conventional or consistent network Change the route used Use counterfeiting hubs e.g. CDG, Antwerp, Dubai, Hong Kong Counterfeiters take advantage of customs territories where border enforcement for in transit goods is known to be weak

Ability to stop transit goods crucial Large consignment at border vs small quantities in market No guarantee that consignment will be identified and detained at final destination Prevent potentially harmful products entering distribution chain Customs detention = opportunity to identify manufacturing source

OECD Update Survey $200 billion (2005) $250 billion (2007) 1.85% of world trade (2000) 1.95% of world trade (2007) Source: OECD Magnitude of Counterfeiting & Piracy of Tangible Products: An Update – November 2009

Source: WCO Customs & IPR Report Cases: 14, % Articles: 371m +316% Origin Unknown: 4,993 cases Departure Unknown: 3,289 cases Destination Unknown: 1,132 cases

Source: WCO Customs & IPR Report Transit: 3,111 cases 21% Transit >2: 306 shipments Transit >3: 52 shipments Shipments using transit routes: 46% seized at final destination 54% intercepted en route

Top 10 Transit Countries - Seizures CountrySeizures Germany854 Netherlands445 France222 Hong Kong, China146 Norway121 Spain115 Romania110 Belgium82 Bulgaria79 Chile64 Poland61 Source: WCO Customs & IPR Report 2008

Cases: 49, % Articles: 179m +126% Applications: 12,866 Source: Report on EU Customs Enforcement of IPR Provenance Unknown: 3.02% Origin Unknown: 9.89%

Source: Report on EU Customs Enforcement of IPR Cases: 90% under import procedure; 7% in transit Articles: 43% under import procedure; 42% in transit

Source: Report on EU Customs Enforcement of IPR Cases: +57% Articles: +118% Medifake: 32m stopped; 15% infringed IPR; 50% under import procedure; 26% in transit; 21% in re-export; 6% based on patent 93% based on TM (25% were in transit)

Counterfeits & Transit Arty Rajendra Rouse

Community goods and non-Community goods Non-Community goods must be assigned Customs-approved treatment Such procedures include: Release for free circulation Suspensive procedures=transit Community Customs Code

Counterfeit Goods Regulation (CGR) Anti-Piracy Regulation (APR) Purpose History – 3842/86 (1986) – 3295/94 (1994) – 1383/2003 (2003) Regulation 1383

Definition of counterfeit goods: Goods... bearing... a trademark identical to the trademark.. registered in respect of the same type of goods, or which cannot be distinguished in its essential aspects from such a trademark, and which thereby infringes the trademark- holder's rights under Community law.

Customs check goods entering into UK territory Customs notify rights holder and send sample of suspect goods Rights holder verifies status of sample Customs seize goods if counterfeit Goods forfeited for destruction How Regulation 1383 worked in the UK

The UK Customs policy Staff should cease to target or detain goods suspected of infringing intellectual property rights of goods in transit/transhipment absent evidence of a likely diversion onto the UK or wider EU market.

Class International (2005)

Infringement under the Trade Marks Directive Proprietor cannot oppose mere entry into the EU of goods under external transit Infringement only if goods are being put on the EU market Class International (2005)

Montex (2006)

Infringement under the Trade Marks Directive Trade mark owner does not have right to prohibit the mere transit of goods Infringement requires evidence that importer engaged in acts aimed at putting goods on the EU market

Regulation 1383 Definition of counterfeit goods: Goods... bearing... a trademark identical to the trademark.. registered in respect of the same type of goods, or which cannot be distinguished in its essential aspects from such a trademark, and which thereby infringes the trademark- holder's rights under Community law.

Polo (2000)

CGR was expressly designed to apply to goods in transit Risk that goods fraudulently brought back into the EU

Rolex (2004)

Counterfeit Rolex watches intercepted by Austrian Customs No criminal provisions prohibiting transit CGR applies to transit

Regulation 1383 Recital 3 - Counterfeit goods under suspensive procedure, i.e. transit, should be prohibited Article 1(1)(b) - Goods can be found on checks when under suspensive procedure i.e. transit

Recital 8 – use criteria to establish whether goods produced in that Member State would infringe Manufacturing Fiction deployed in Sisvel (Case Number Court of the Hague) Manufacturing Fiction

Regulation 1383 Definition of counterfeit goods Goods... bearing... a trademark identical to the trademark.. registered in respect of the same type of goods, or which cannot be distinguished in its essential aspects from such a trademark, and which thereby infringes the trademark-holder's rights under Community law.

Are non-Community goods in transit capable of constituting counterfeit goods within the CGR if there is no evidence to suggest that those goods will be put on the market in the EC, either in conformity with a customs procedure or by means of an illicit diversion. Nokia reference

consignment of 7,000 shavers from China to no designated destination intercepted by Antwerp Customs Chinese shipper challenges detention relying on Montex Philips rely on Manufacturing Fiction Facts in Philips case

relates to Regulation 3295/94 relates to all IP rights should the court take into account the temporary storage status/the transit status and apply the legal fiction that the goods were manufactured in that same Member State when assessing infringement? Philips reference

Request for Nokia reference to be joined with Philips reference INTA amicus intervention INTAs Observations filed March 2010 Customs, Member States and Nokias Observations due to be filed Next steps

The Future ? ECJ has to rule: –Policy considerations –Position of Member States? –Position of Commission? –Follow Class / Montex or Polo / Rolex? Amendment to 1383/2003? Amend Trade Marks Directive? ACTA?

TAXUD / EFPIA Joint Statement 2. It is important to respect the right of Customs Authorities to control goods in transit and ensure that measures can be taken against global trade in pharmaceutical products suspected of infringing IPR 4. European Customs Authorities will pay particular attention to cases involving the transit of medicines through the Community Customs Territory

IMPACT – Lisbon 2007 Responsibilities Government responsibilities include, but are not limited to, the following: 3.1. establish an adequate legal basis (including criminal, administrative and civil frameworks) for imposing, ensuring compliance with, and enforcement of obligations of all concerned parties; 3.2. ensure that this legal basis can be applied to all medical products, including those that may be counterfeit medical products, and/or in transit/trans-shipment, bonded warehouses, free trade zones, and all situations of the international trade Illegal acts: It is prohibited to: 4.2. own, possess or control counterfeit medical products in transit, trans- shipment, free trade zones, bonded-warehouses and other situations of international commerce