March 24, 2016

Changes to the EU regulation on Community trade marks (now renamed EU trade marks), include a new measure designed to help brand owners stop counterfeit goods being transported through the EU.  The new measure came into force on 23 March 2016.

Under the Customs Regulation (608/2013), customs authorities are empowered to detain infringing goods.  However, counterfeit goods in transit through the EU to and from third countries were previously protected from customs detentions because, as they were not being put on the market in the EU (and therefore did not constitute use of the marks “in the course of trade”), they weren’t considered to infringe the relevant CTM/national marks.  This was a problem for right holders because many of these goods failed to reach their third country “final destinations” or were subsequently diverted illegitimately to EU markets.

The position has changed under the EUTM Regulation (as amended by Regulation 2015/2424).  Under new Article 9(4), and subject to an important proviso, trade mark owners can prevent the entry into the EU of counterfeit goods even where those goods are not being released for free circulation in the EU.  Article 9(4) provides:

“Without prejudice to the rights of proprietors acquired before the filing date or the priority date of the EU trade mark, the proprietor of that EU trade mark shall also be entitled to prevent all third parties from bringing goods, in the course of trade, into the Union without being released for free circulation there, where such goods, including packaging, come from third countries and bear without authorisation a trade mark which is identical with the EU trade mark registered in respect of such goods, or which cannot be distinguished in its essential aspects from that trade mark.

Under this provision, customs authorities can seize counterfeit goods in transit through the EU in accordance with the procedures set out in the Customs Regulation.  Goods in transit is defined broadly in the recitals to Regulation 2015/2424 and includes the placement of goods “in all customs situations, including transit, transhipment, warehousing, free zones, temporary storage, inwards processing or temporary admission“.

But note the proviso, which states as follows:

“The entitlement of the proprietor of an EU trade mark pursuant to the first subparagraph shall lapse if, during the proceedings to determine whether the EU trade mark has been infringed, initiated in accordance with Regulation (EU) No 608/2013 of the European Parliament and of the Council concerning customs enforcement of intellectual property rights, evidence is provided by the declarant or the holder of the goods that the proprietor of the EU trade mark is not entitled to prohibit the placing of the goods on the market in the country of final destination.”

In other words, customs will release the goods if the alleged infringer can show that the trade mark owner has no relevant rights in the final destination country.

Helpfully, the burden of proof that the goods will not infringe in the destination country is squarely on the alleged infringer.  This suggests that there is a presumption of infringement if the goods would be infringing in the EU unless and until the declarant/holder can prove that the goods do not infringe in the destination country.   Declarants/holders may well be slow to expend resources on opposing customs detentions under the new provisions.  That said, an opposition from the declarant/holder will be an obstacle for brand owners in the absence of relevant rights.  Whilst it may be prudent to pre-emptively register trade marks in ‘red flag’ countries identified as regular destinations of counterfeits, it will rarely make commercial sense (particularly for SMEs) to register trade marks worldwide.  It’s also unclear how such an opposition would play out in practice.  For instance, what sort of evidence would suffice to show the absence of relevant rights?  The question may prove complex as enforcement rights can derive from both registered trade marks and provisions of national law.

The International Chamber of Commerce (ICC)’s Business Action to Stop Counterfeiting and Piracy (BASCAP) has welcomed the new provisions, which will, in principle, enable counterfeit goods to be seized by customs within the EU even where the goods are destined for a third country.  Notwithstanding potential areas of uncertainty arising from the proviso, it is to be hoped that Article 9(4) will provide a new weapon in the fight against counterfeit goods in transit.