Two recent cases referred to the European Court of Justice (ECJ) have triggered alarm bells among many intellectual property (IP) practitioners in the region – particularly, those working within brands or industries that are common targets of counterfeit activity.
The joined cases of Philips Electronics NV v Lucheng Meijing Industrial Co Company Limited [C-446/09] and Nokia Corporation v HM Revenue and Customs (HMRC) [C-459/09] led to the release of an Advocate General Opinion, as reported on NewLegal Review in February. This opinion has made many question whether the EU is simply turning a blind eye to counterfeiting, as it appears to suggest that officials are not able to take steps to seize allegedly counterfeit goods where they are ‘in transit’ to destinations in which the relevant EU IP Rights do not apply.
In other words, goods that are in transit or temporary storage cannot automatically be considered ‘counterfeit’ without sufficient grounds for suspecting that the goods are to be sold in the EU market.
Someone else’s problem?
The argument put forward by the Advocate General following the combined Nokia-Philips case was that:
1. goods can be seized in the EU only if they are counterfeit;
2. they can be counterfeit only if they violate a company’s EU trademark rights;
3. trademark rights can be violated only if the goods are to be put on the market in the EU; and
4. if the goods are not to be traded within the EU they cannot violate EU regulations.
Although this does not mean that counterfeit goods are ipso facto legally marketable in countries outside the EU, it does mean that in order to enforce its IP rights, Nokia and Philips would both have to have their goods seized in the destination country of intended sale, provided the company has the relevant protection in that country.
It is an important principle of EU law that the free transit of legitimate goods must be upheld within the region. However, the EU needs to be aware of the risk of misinterpretation of its Counterfeit Goods Regulations, which contains the assertion that for such goods to be potentially liable for seizure there must be: ‘sufficient grounds for suspecting that they are counterfeit goods and, in particular, that they are to be put on the market in the EU either in conformity with a customs procedure or by means of an illicit diversion’.
In addition, there is the risk that the EU will be seen to be simply passing the problem onto someone else – and ignoring the moral issues surrounding the marketing of potentially dangerous, or unsafe goods, in poorer parts of the world.
The more such consignments are waved through our airports and docks, the more the producers of counterfeit goods will be encouraged to use such loopholes to ship to less rigidly enforcing states, from which the goods can be illicitly or covertly diverted back into EU markets.
Not fit for purpose
The explosion in internet shopping has emphasised the need for multilateral action.
Computing.co.uk recently published an article claiming that 73% of all websites that sell counterfeit goods are hosted in Western Europe and North America. This would surely indicate that such goods are indeed finding their way back into the EU, and that the problem can no longer be swept under the carpet by enforcing inadequate legislation.
In his High Court conclusion in the original Nokia v HMRC case, Mr Justice Kitchin admitted: ‘I recognise that this result is not satisfactory. I can only hope it provokes a review of the adequacy of the measures available to combat the international trade in fake goods by preventing their transhipment through Member States.’
HMRC has acted strictly within the letter of the law, but as Mr Justice Kitchin commented, we need to question where the buck should stop in the fight against the burgeoning trade in counterfeit goods.
Susan Wall is a European trademark attorney based at Novagraaf in Norwich, UK
