Background

At present, the Counterfeit Goods Regulation 1383/2003/EC codifies the processes for customs action against goods suspected of infringing specific IP rights, and the measures that can be taken once infringement has been determined.  This legislation can be relied upon by holders of trade marks, copyrights, design rights, patents, supplementary protection certificates, plant-variety rights, protected designations of origin and protected geographical indications in relation to infringing goods.  Customs authorities can also take custody of suspected infringing goods on their own initiative and invite rights holders subsequently to make a request for action. 

In September 2008, the European Council adopted a resolution outlining a comprehensive anti-counterfeiting plan for the European Union, and invited the European Commission (EC) and Member States to review the existing Counterfeit Goods Regulation with a view to replacing it.  Following this review, and subsequent consultations and tripartite negotiations, the new Regulation is nearing the end of the lengthy European legislative process.  The adoption of the new Regulation will introduce a number of changes to the current system of customs measures against infringing goods.

Main Changes Under The New Regulation

Extension of Protection

The new Regulation applies to an enlarged assembly of goods and IP rights.  Goods that are designed to circumvent technological measures now fall within the anti-counterfeiting customs procedures.  The new Regulation also extends protection to holders of rights in trade names, semiconductor topographies, utility models and technology circumvention devices. 

Destruction of Small Consignments of Goods

The new Regulation establishes a new procedure enabling a rights holder to apply for the destruction of small consignments of allegedly counterfeit or pirated non-perishable goods, without having to undergo formal legal proceedings.  This is aimed at reducing the administrative burden and costs relating to increased trade in counterfeits in small shipments, caused in no small part by the rise in internet shopping.  

A small consignment is defined as a postal or express courier consignment that contains three units or less or has a gross weight of less than two kilograms.  Significantly, a mechanism has been built into the new Regulation to allow the EC to rapidly amend this definition if traders are perceived to be deliberately circumventing these thresholds.

This new procedure will permit qualifying consignments of goods to be destroyed by customs, without the specific involvement of the rights holder, if no opposition is raised by the importer within 10 working days of notification of destruction.  If the importer raises an objection to the destruction, the rights holder will have to revert to the traditional course of seeking a determination from the court that the goods are infringing and should be delivered up or destroyed.  This procedure only operates in restricted circumstances, namely in relation to small consignments of allegedly counterfeit or pirated non-perishable goods. 

Use of Information

There is currently a lack of meaningful progress in relation to the seizure and destruction of goods that are merely in transit through the European Union.  These still cannot be detained, owing to the lack of an infringing act.  A small concession has been made in the form of clarification of what information customs authorities may share with one another. 

It is now clear that where EU customs authorities detect a consignment of counterfeits in transit, it is authorised to relay that information to the customs authority in the destination country to encourage seizure on arrival.  Whether or not information sharing of this sort will have a significant impact on counterfeiting activity remains to be seen.  The EU legislature is expected to revisit the issue of goods in transit in relation to prospective trade mark legislation, which is viewed as being a more appropriate vehicle for the debate.

The new Regulation also clarifies that, amongst other things, rights holders may use information concerning the consignor and consignee provided by Customs, not just to initiate civil infringement proceedings or to obtain consent for destruction, but also as a basis for criminal proceedings and to seek compensation.

Conclusion

The new Regulation responds to the recent dramatic increase in counterfeit trade in small consignments that are purchased viawebsites operating outside the jurisdictional reach of EU rights holders.  The extension of the scope of protection and the new streamlined procedure for small scale destruction will be welcomed by rights holders.  For a rights holder to enjoy the benefit of this reduction in administrative burden, it will need to inform the relevant authorities of its rights and opt-in to the implied consent destruction procedure when filing its Customs Monitoring Application.  As part of this application process, the rights holder agrees to cover the costs related to the destruction of goods, seemingly even where small consignments are destroyed without the rights holder’s active involvement.

The new Regulation is good news for IP rights holders but, despite intense lobbying, there has been a lack of progress in relation to goods in transit, and the cost burden of the storage and destruction of goods remains with the rights holder in the first instance.  It should also be noted that the legislative process is not yet complete.  The new Regulation is still subject to a plenary vote by the European Parliament in April. Once the European Council confirms its agreement, the European Parliament will be asked to give its final endorsement at a second reading without further changing the text.  If endorsed, it is scheduled to take direct effect in all Member States from 1 January 2014. 

Please click here to view the full text of the new Regulation. 

Keo Shaw, trainee solicitor at the London office, contributed to this article.