How customs can help you in your battle against fake goods Smuggling is a common theme in popular literature and films, inspiring clandestine plots and romantic nostalgia. In reality, smuggling fake goods takes a serious toll on legitimate businesses, and brand owners should consider utilising all weapons in their arsenal in taking a stance against importers of such goods.
One such weapon is to fight fakes at the borders. In the UK, Her Majesty’s Revenue and Customs (“HMRC”) is responsible for national policy governing IP rights enforcement at the UK external border. It works with the UK Border Force (“UKBF”), which is responsible for taking certain actions in relation to goods entering the country that are suspected of infringing IP rights. As mentioned in the first article in our series, registering your IP with HMRC, and other relevant national customs authorities in countries where your business operates, can be an effective and relatively straightforward way to bolster protection for your IP rights. That is particularly true in the EU now that the powers of the national customs authorities here have been enhanced by the new Customs Enforcement Regulation 608/2013, which came into force on 1 January 2014.
The enhanced powers simplify the process whereby goods can be destroyed without a court order and also set down a procedure for the destruction of small consignments of counterfeit goods without requiring separate consent in relation to each consignment.
Applications to customs authorities In order to benefit from the enhanced powers under the new Customs Enforcement Regulation, IP rights holders (or the person authorised to use the IP rights) must make an application. This can either be done using a National IP Rights Application for Action (“AFA”), which will only register the rights in one country, or an EU AFA. Ideally, the rights owner or exclusive licensee should apply for protection of the rights at least 30 working days before they require the protection to start. An expedited application process is available, if required.
The protection granted under the AFA will last for one year at a time (AFAs are renewable) and will not exceed the expiry date of any registered IP rights so it is useful to ensure that any renewals of your IP registrations are up to date before applying.
Customs authorities’ detention and destruction procedure Once your IP rights have been registered with the national customs authority, the authorities may intercept goods that are suspected to infringe those IP rights, without having to determine whether there has been any infringement (so, without having to go to court). In the UK, the UKBF will notify the registered rights holder that goods have been detained and give them 10 working days to assess the goods (three working days for perishable goods). To help with the assessment, samples of the goods may be provided.
If the rights holder believes the goods to be counterfeit or to infringe its IP, it has a number of options:
- Do nothing and allow the goods to be released to the importer;
- Write to the importer of the goods and ask for their permission for the destruction of the goods (you would also normally send undertakings for the importer to sign promising not to infringe your IP rights again); or
- Issue legal proceedings (usually seeking an interim injunction in the first instance to prevent the goods being released to the importer).
Many rights holders choose to write to the importer first as this can be the most time and cost-effective approach. If permission to destroy the goods is received and provided to the UKBA, the goods will be destroyed in due course. The rights holder will normally have to pay for the destruction of the goods, unless it has obtained the importer’s agreement to pay for these costs.
If the importer refuses to permit the goods to be destroyed, and denies that any IP rights have been infringed, then the rights holder can either issue legal proceedings to ensure the goods remain detained or make the commercial decision to allow the goods to be released. This decision is often affected by the number of items and estimated retail value of the detained goods.
If the importer fails to respond at all, their consent to the destruction of the goods may be assumed by the UKBA. In that instance, if the importer complains, after the goods are destroyed, that the goods did not infringe the IP then the rights holder could be liable to the importer for the value of the destroyed goods.
Small consignments The new Customs Enforcement Regulation makes provision for the destruction of counterfeit/infringing goods which have been transported as a “small consignment”. That means an express courier or postal consignment of three units or less or which has a gross weight of less than 2kg. The procedure does not apply to perishable goods.
To take advantage of this, the rights holder must have requested the use of the procedure when completing the AFA application or renewal. However, opting in will not be the most prudent approach for everyone. Once the rights holder has opted in, they will not receive notifications of the detention or destruction of small consignments unless the declarant or holder of the goods objects to their destruction; though they might receive an invoice for the costs of destruction after the event. Though the rights holder may request information about the nature and quantity of the goods, they may lose important evidence and valuable information about the importer/exporter of the small consignment, and where the goods were produced.
Availability and use of information As part of the new regime, the customs authorities in each EU member state are required to maintain information on a centralised electronic database which is to be used to exchange information.
The new Customs Enforcement Regulation has also broadened and clarified the permitted uses by rights holders of information provided to them by customs authorities. Rights holders may now use certain information relating to the importer and consignments in order to bring civil and/or criminal proceedings against, or seek compensation from, infringers. The information may also be shared with other customs authorities in the EU.
Parallel imports Though the new Regulation extends the remit to cover a wider range of IP rights, the regime was not extended to cover parallel imports, which has caused some disappointment for rights holders.
Comment Overall, the new Regulation enhances the previous customs regime, which had been in place for ten years. It is a cost effective, straightforward procedure for IP rights holders which ought to assist in their fight against fakes.
To view part one in this series, please click here.
Client Alert - 2014-192