In November 2009, the UK Court of Appeal of England and Wales and the Belgian Court of First Instance of Antwerp each referred questions to the Court of Justice of the European Union (the “ECJ”) concerning the legal position of goods in transit through an EU Member State in which these goods infringe intellectual property rights (See, this Newsletter, Volume 2009, No. 11, p. 6). The questions relate to two distinct national procedures, but were joined before the ECJ. Advocate General Cruz Villalón (the “AG”) delivered his opinion in these joined cases in February 2011 (See, VBB on Belgian Business Law,, Volume 2011, No. 2, p. 7, available at www.vbb.com). The ECJ has now handed down its judgment (the “Judgment”), mainly confirming the opinion of the AG.
Court of Appeal of England and Wales
In the case before the Court of Appeal of England and Wales (Case C-495/09, Nokia v. HMCRC) UK customs officers had stopped and inspected during transit at Heathrow Airport a consignment of goods from Hong Kong which was destined for a consignee in Colombia. The goods bore a Community trade mark held by Nokia and Nokia confirmed that the goods were counterfeit. In its reference to the ECJ, the English court sought to establish whether goods in transit between two third countries can constitute ‘counterfeit goods’ or ‘pirated goods’ within the meaning of Regulation (EC) No 1383/2003 of 22 July 2003 concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights (the “Customs Regulation”), if there is no proof that they will be put on the market in the EU.
The text of the Customs Regulation is not unequivocal about whether or not customs authorities can detain goods with transit status. In addition, the ECJ had already limited actions against goods in transit in the Montex judgment (Case C-281/05, See VBB on Belgian Business Law , Volume 2006, No 12, p. 4, available at www.vbb.com). This judgment did not involve the Customs Regulation, but was based on an interpretation of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks. In Montex, the ECJ held that a trade mark proprietor is only allowed to oppose the transit of goods bearing its trade mark without its consent in an EU Member State in which its trade mark is protected if those goods are subject to the act of a third party which necessarily entails their being put on the EU market.
Court of First Instance of Antwerp
In the case before the Court of First Instance of Antwerp (Case C-446/09, Philips v. Lucheng Meijing), Philips sought to destroy a shipment of allegedly pirated shavers made in China of which the release had been suspended by the customs authorities. To this end, Philips brought an action before the Court of First Instance of Antwerp. The goods at issue were declared by the Belgian company Röhling Belgium NV seeking customs warehousing, without stating the country of destination.
The Court of First Instance of Antwerp raised the question as to whether Article 6, section 2, b) of Regulation No 3295/94 of 22 December 1994 laying down measures to prohibit the release for free circulation, export, re-export or entry for a suspensive procedure of counterfeit and pirated goods (the “Former Customs Regulation”) and Recital 8 of the Customs Regulation establish a so called ‘legal fiction of manufacturing’.
The legal fiction of manufacturing has been developed by legal authors on the basis of the above provisions, and has been applied by certain national courts. The fiction implies that the court which decides whether or not intellectual property rights have been infringed must consider the detained goods as if these had been produced in the Member State in which they were seized. In other words, goods in transit through Belgium could be seized and destroyed by Belgian customs if these goods would infringe intellectual property rights had they been manufactured in Belgium. In order to understand the relevance of this legal fiction for goods with transit status, it is important to realise that goods detained on the basis of the Customs Regulation can only be destroyed or disposed of outside commercial channels without the consent of the declarant, the holder or the owner of the goods, if a competent court has found an infringement of intellectual property rights. However, the legal fiction of manufacturing does not sit well with the Montex judgment.
Judgment
First, the ECJ focused on the temporary detention by the customs authorities of goods that are imitations or copies of goods protected by intellectual property rights in the EU and are in transit or stored in a customs warehouse in the EU. Referring to the Montex judgment and other case-law, the ECJ held that such goods coming from a third country cannot, as such, be classified as ‘pirated’ or ‘counterfeit’ that can give rise to detention measures. Indeed, the ECJ indicated that goods thus brought into the customs territory of the EU without being released for free circulation have not been put on sale in the EU and, accordingly, do not necessarily infringe intellectual property rights. However, the ECJ considered that the authorities should be given the opportunity to investigate the matter and suspend release of or detain goods if there are elements which give rise to suspicion that intellectual property rights are infringed. The ECJ explained that such elements include the lack of reliable information regarding the consignor or manufacturer of the goods, the fact that the destination of the goods is not declared or a lack of cooperation with the customs authorities.
Second, the ECJ explained that the elements which permit the customs authorities to detain the goods are not sufficient to find infringement of intellectual property rights. The ECJ stated that the competent court should make its decision on the basis of proof of an infringement and not on the basis of a mere suspicion. Further, the ECJ clarified that, in order for goods to be considered as ‘pirated goods’ or ‘counterfeit goods’, it is required that (i) it is proven that the goods are meant to be put on sale in the EU; or (ii) it is clear from correspondence or from other documents that the distribution of the goods to EU consumers is planned. As a result, the ECJ rejected the application of the legal fiction of manufacturing.
As a result of the Judgment, it will become more difficult for intellectual property holders as well as customs offices to seize counterfeit goods which are brought into the EU under a suspensive procedure.
