Faking it, or beyond suspicion? Counterfeits in transit

"Should we let him in? Are there
 grounds for suspecting that
 he's not the real Advocate General .."

If there's much more breaking news today, tytoc collie will go pop, but the Opinion of Advocate General Cruz Villalon has just been published on Curia in Joined Cases C‑446/09 Koninklijke Philips Electronics NV v Lucheng Meijing Industrial Company Ltd, Far East Sourcing Ltd, Röhlig Hong Kong Ltd and Röhlig Belgium NV and C‑495/09 Nokia Corporation v Her Majesty’s Commissioners of Revenue and Customs. The first is a reference from Belgium, the second from England and Wales.

In Philips the Antwerp investigations inspectorate of the Belgian Customs and Excise Administration detained a consignment of shavers from Shanghai, wihch they suspected of infringing Philips's intellectual property rights. The customs authorities sent Philips a photograph of the ‘Golden Shaver’ and informed it that the following companies were involved in the manufacture of or trade in the detained shavers: Lucheng Meijing Industrial Company Ltd, a Chinese manufacturer of shavers; Far East Sourcing Ltd, established in Hong Kong, the shipper of the goods; Röhlig Hong Kong Ltd, the forwarding agent for the goods in Hong Kong, acting on the instructions of the declarant or consignee of the goods; Röhlig Belgium NV, the forwarding agent for the goods in Belgium, acting on the instructions of the declarant or consignee of the goods. In the customs declaration issued by the representative of Röhlig Belgium NV, the goods were declared under the temporary import arrangements without stating the country of destination. Philips brought an action before the Court of First Instance, Antwerp, seeking a ruling that its intellectual property rights had been infringed and claiming that, in accordance with Article 6(2)(b) of Regulation 3295/94 [the then-current Regulation on the temporary suspension of free movement of goods suspected of infringing certain IP rights], the Court should use as its starting point the fiction that the shavers seized had been manufactured in Belgium and should then apply Belgian law for the purposes of establishing the infringement. The Court, before ruling on the merits of the case, referred the following question to the Court of Justice for a preliminary ruling:

‘Does Article 6(2)(b) of Council Regulation ... 3295/94 ... constitute a uniform rule of Community law which must be taken into account by the court of the Member State which, in accordance with Article 7 of the Regulation, has been approached by the holder of an intellectual-property right, and does that rule imply that, in making its decision, the court may not take into account the temporary storage status/transit status and must apply the fiction that the goods were manufactured in that same Member State, and must then decide, by applying the law of that Member State, whether those goods infringe the intellectual-property right in question?’

In Nokia, Her Majesty’s Commissioners of Revenue and Customs (HMRC) stopped and inspected at Heathrow Airport a consignment of goods which had come from Hong Kong and was destined for Colombia, comprising approximately 400 mobile telephones, batteries, manuals, boxes and hands-free kits, each of which bore the trade mark ‘Nokia’. HMRC sent Nokia samples of those goods. After inspecting the samples, Nokia notified HMRC that the goods were counterfeit and asked whether HMRC intended to detain them. HMRC said it was uncertain how goods could be ‘counterfeit’ within the meaning of Article 2(1)(a)(i) of Regulation  1383/2003 [which replaced Regulation 3295/94] in the absence of any evidence that they might be diverted onto the European Union market. HMRC therefore concluded that, in the absence of such evidence, it was not lawful to deprive the owner of its goods. Nokia issued an application against HMRC, asking for the names and addresses of the consignor and the consignee together with any other relevant documents relating to the consignment in the possession of HMRC. Even though such documents were sent to it, Nokia did not succeed in identifying the consignor or the consignee of the goods, and concluded that they had both taken steps to hide their identity. Eventually Nokia commenced legal proceedings in which the judge held that the Regulation did not entitle or require customs authorities to detain or seize counterfeit goods in transit where there was no evidence that the goods would be diverted onto the market in Member States because such goods were not ‘counterfeit goods’ under Article 2(1)(a)(i) of Regulation 1383/2003. On appeal, the Court of Appeal of England and Wales referred the following question to the Court of Justice for a preliminary ruling:

‘Are non-Community goods bearing a Community trade mark which are subject to customs supervision in a Member State and in transit from a non-Member State to another non-Member State capable of constituting “counterfeit goods” within the meaning of Article 2(l)(a) of Regulation ... 1383/2003 if there is no evidence to suggest that those goods will be put on the market in the EC, either in conformity with a customs procedure or by means of an illicit diversion?’

This morning the Advocate General advised the Court of Justice of the European Union to rule in Philips:

Article 6(2)(b) of Council Regulation ... 3295/94 of 22 December 1994 laying down measures concerning the entry into the Community and the export and re-export from the Community of goods infringing certain intellectual property rights is not to be interpreted as meaning that the judicial authority of the Member State called on, in accordance with Article 7 of that regulation, by the holder of an intellectual property right, may take no account of the status of temporary entry or of transit of the goods in question, or, therefore, as meaning that that authority may apply the fiction that those goods were produced in that same Member State for the purpose of ruling, in accordance with the law of that State, whether or not they infringe the intellectual property right at issue

and to rule in Nokia:

Non-Community goods bearing a Community trade mark which are subject to customs supervision in a Member State and are in transit from one non-member country to another non-member country may be seized by the customs authorities provided that there are sufficient grounds for suspecting [i] that they are counterfeit goods and, in particular, [ii] that they are to be put on the market in the European Union, either in conformity with a customs procedure or by means of an illicit diversion.

Says tytoc collie, so it's goodbye to the notorious "manufacturing fiction" if the AG's Opinion is upheld --and a host of problems for all IP owners in policing trade in fakes and infringements if the recommendation in Nokia is going to be left for the customs authorities and national courts of 27 EU Member States to interpret and apply in their respective ways. Anyone whose daily business consists of transporting fakes from one place to another via the EU will soon compile a chart of easy-transit destinations.

In particular, what are "sufficient grounds for suspecting"? Does this mean that there are grounds for thinking the goods are more likely than not to be counterfeit, or that the possibility that are are not genuine cannot be excluded" (the highly problematic test for 'likelihood of confusion' that already bedevils EU trade mark law), or something in between. The AG says:

"106. Now the problem is that the meaning of ‘suspicion’ in this context is inherently bound up with the facts [This seems to limit the operation of any sort of presumption in favour of suspicion based on, for example, the absence of information concerning the identity of the consignee]. It is beyond doubt that ‘suspicion’ must not be taken to mean irrefutable findings, but that criterion must be prevented from leading to total discretion for the customs authorities in their action.

107. For that reason, I consider that, for the customs authorities to be able lawfully to seize goods in transit subject to their control, they must at the very least have ‘the beginnings of proof’, that is to say, some evidence that those goods may in fact infringe an intellectual property right" [that would be great if there were common standards of evidence -- and on the assumption that the customs authorities are well enough trained to deal with these issues].

Then, at para 109 the AG says

"... in the assessing of those ‘suspicions’ particular account must be taken of the danger of fraudulent entry of goods into the European Union [What is the connection between a suspicion of what a product is and the danger of what it might do?]. Despite all the precautions entailed by the system of Community vigilance, that danger exists, inasmuch as it is not to be forgotten that, even if the external transit procedure itself is founded on a legal fiction, the goods are physically to be found in the territory of the European Union".

tytoc collie suspects that the Court's ruling will be a good deal shorter than the 113 paragraphs of this Opinion.  He very much hopes that they will prove to be a workable foundation for IP owners and customs authorities to deal with those cheeky folk who send fake goods right through EU terrritory with impunity.  Merpel says, what sort of evidence supports the suspicion that the goods in transit are to be marketed in the EU? Surely a set of common rules and guidance is needed here.