What actually happens when Customs encounters goods suspected of infringing trademarks, patents, designs, or other intellectual property rights? And what should be done if this happens?
When Customs authorities encounter goods during an inspection and suspect these goods may involve counterfeiting, it detains these goods and initiates an investigation. In the best case, the goods are released after the investigation; however, it is also common for the goods to end up as scrap in a destruction facility. In the latter case, a lengthy process with costs for all parties involved in the supply chain often follows. The basis for Customs’ and the rights holder’s actions is the so-called Anti-Counterfeiting Regulation (Regulation (EC) No. 1383/2003). This article will delve into the principles of this regulation and the opportunities and threats for both the rights holder and the alleged infringer.
The development of trademarks, patents, and other forms of intellectual property is often a costly affair. For this reason, the interests of holders of these rights are well protected. For example, Nike has undoubtedly invested hundreds of millions to achieve the current value of its brand. It is understandable that such a rights holder will vigorously defend their trademark rights. However, it is no secret that there is a thriving trade in goods that infringe intellectual property rights. The most well-known examples are counterfeit goods, such as textiles, watches, or other luxury items. Less visible is the infringement of patent rights. Especially in the electronics industry, extensive litigation occurs over patent infringements related to technology (e.g., computer chips or MP3 or MP4 technology).
To protect these intellectual property rights, the WTO established a treaty at the global level in 1994: the TRIPS Agreement (Agreement on Trade-Related Aspects of Intellectual Property Rights). Based on this, the European legislator also established a regulation in 1994, which was completely replaced in 2003. This is Regulation (EC) No. 1383/2003, also known as the Anti-Counterfeiting Regulation. After an evaluation, this Regulation was repealed in 2013 and replaced by Regulation (EU) 608/2013, which deals with the enforcement by authorities in cases of trademark infringements.
This regulation allows holders of intellectual property rights to request Customs authorities in European Member States to take action. This is done through a specified request where the rights holder indicates that they hold an intellectual property right and requests the authorities to ‘watch out for’ possible infringements and to take enforcement action.
Based on this request, Customs authorities can detain goods that are found during an inspection and are suspected of infringing an intellectual property right. Additionally, national Customs authorities have the right to detain goods ex officio. If such a situation arises, the rights holders are notified and given the opportunity to inspect samples of the goods.
It is clear that a request to Customs to act is a very valuable tool for rights holders to intervene (both justifiably and unjustifiably) against (alleged) infringers of their trademark. Customs generally has a good view of goods flows, so such a request can have a significant impact. In our practice, we still see an increasing use of so-called “border detentions.”
A risk in this scenario is that a request for action is drafted too broadly. In that case, too many goods may be affected by a Customs detention. Besides the fact that Customs may become “less enthusiastic” about enforcement over time, this can also cause significant damage (e.g., due to delays in deliveries that later prove to be unnecessary or due to devaluation or destruction of the goods).
Under the regulation, the rights holder is liable for damages and must also indemnify Customs from liability to third parties. For example, Customs detain a batch of goods. The intellectual property rights holder then seizes the goods. After several years of litigation, it is determined that the goods do not infringe an intellectual property right. During those years, however, the goods may have become worthless or, in many cases, destroyed. Thus, coordination is again of great importance.
The regulations offer intellectual property rights holders excellent opportunities to detect and combat infringements of their rights. Dutch Customs, in particular, have developed an effective system for regularly detecting and detaining infringing goods. Unfortunately, this is not always the case elsewhere, which impedes effective enforcement. Infringing producers who are “malicious” target countries with inadequate oversight. The goods are then placed into free circulation in that country and eventually reach their final destination in various Member States. This shifts the entire goods flow out of the rights holder’s view and reduces the likelihood of detection. A possible solution is for Customs authorities in different countries to collaborate. The rights holder can also facilitate this by making the request for action as specific as possible.
Once an application is made and granted, a decision confirming that the request for action has been accepted is issued to the applicant. Customs authorities will then be aware of the possible infringement of an IP right and will – if possible – specifically search for a particular shipment or be ‘triggered’ by the import of such goods. If Customs find the goods, they can ‘detain’ them. If this happens, the holder of the decision will be notified. As the ‘holder of the decision,’ you must then indicate within 10 working days whether there is an infringement of an IP right and whether you agree to the destruction of the goods. If no response is given within 10 days (or consent for release is not granted), the goods will be released.
The holder of the goods is also informed by Customs authorities when the goods are detained. The holder of the goods (i.e., the person who physically has the goods) must indicate whether they agree to destruction. If they do not agree, they must initiate a civil procedure in which they dispute the infringement of the IP right. This procedure must also be initiated within 10 days of the notification from Customs authorities. If the holder of the goods does not respond within the set period (where the 10-day period can be extended once by 10 days), Customs will assume that the holder of the goods agrees to destruction.
It is crucial to always respond!
A request based on Regulation (EU) 608/2013 is a valuable tool that provides rights holders with options to seek protection for their trademark(s). However, for meaningful and correct application, customization is required, with a careful assessment of the opportunities and/or threats involved.
Customs Knowledge is pleased to advise and assist you professionally in submitting a request for enforcement (“border detention”) and in additional measures that may be possible. If you are, rightly or wrongly, identified as an infringer, we can also offer you advice.
For questions or comments on this topic, please contact Lidwina Hoekstraor Bart Boersma.
While every care has been taken in the preparation of this publication, Customs Knowledge accepts no liability for any errors or omissions, nor for their consequences. This article is not intended as specific advice. Please also refer to the General Terms and Conditions of Customs Knowledge BV.
