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23 February 2017TrademarksUlrike Grübler

EU trademark reforms: rights of passage

Counterfeiting remains one of the most serious threats to brand owners, and international transit of fake goods forms a substantial part of the multifaceted phenomenon. The travel of counterfeits though various jurisdictions is without doubt one of the most controversial issues in trademark law, considering that the scope of trademarks is territorial by nature.

After years of advocacy and lobbying, the EU trademark reform package finally put the demanded tools into the hands of trademark owners. Together with the EU customs regulation, the goods-in-transit provisions allow customs to stop counterfeit goods in transit.

The goods-in-transit issue has been one of the most disputed subjects throughout the EU trademark reform process. Goods in transit are products that are not meant to be delivered into EU countries but cross the territory on their way to the final destination. A European Union trademark (EUTM) gives the proprietor the right to hinder unauthorised use of an identical or similar mark in the course of trade. The latter applies only if this entails a likelihood of confusion, takes unfair advantage of or is detrimental to the reputation of the distinctive character of the mark. The expression “in the course of trade” has certain territorial implications and has also been the issue when it comes to goods in transit.

The Court of Justice of the European Union (CJEU) first supported that EU customs may take action against counterfeit goods in transit, but in a second set of rulings it concluded that goods in transit did not constitute trademark infringement. According to Polo/Lauren Company v PT Dwidua Langgeng Pratama International Freight Forwarders (C- 383/98), it was stated that goods entering the EU territory are subject to customs control regardless of whether they are destined for a third country.

In  Class International v Colgate Palmolive (C-405/03) and  Montex Holding v Diesel (C-281/05), the CJEU on the other hand concluded that transit does not constitute an infringement. In the well-knownNokia cases ( C-446/09 and C-495/09) the CJEU finally held that it is not permissible to seize infringing goods in transit which are destined for sale outside the EU. This applies unless there is a clear intention to divert the goods to consumers in the EU. The CJEU lowered the standard of proof by stating that the burden would be satisfied if the destination of the goods is undeclared, there is lack of precise or reliable information on the identity or address of the manufacturer or consignor of the goods, or there is a lack of cooperation with customs authorities. However, whenever this could not be claimed, the customs were not able to seize the goods.

In December 2015, the European Parliament approved the EU trademark reform package consisting of the amending EU trademark regulation (EU 2015/2424) and the new trademarks directive (EU 2015/2436). The regulation entered into force on March 23, 2016, whereas EU member states will have until January 2019 to implement the majority of the directive’s provisions into their national legislations—including those on counterfeit goods in transit.

Article 9(4) of the regulation classifies goods in transit originating from third countries as counterfeits if the goods bear a trademark that constitutes an infringement of an EUTM. A seizure can be performed when the goods were not meant for the EU, unless they are not considered to be infringing in the country of their final destination. The respective burden of proof is shifted towards the alleged infringer. Unlike before, it is the declarant or the holder of the products that must claim and (if challenged) prove that no trademark infringement will occur in the country of final destination.

“The new provisions raise many legal issues which must be clarified by national courts and ultimately by the CJEU.”

To further clarify the amendments, the European Commission published a Commission Notice on July 5, 2016. It focuses on customs enforcement of IP rights concerning goods in transit ( 2016/C 244/03). The notice touches on the implementation of the changes triggered by the EU trademark reform in relation to counterfeit goods in transit. The notice outlines enforcement procedures to permit action by customs authorities against goods suspected of infringing IP rights.

However, it does not set out criteria for ascertaining the existence of infringement. The question of whether an IP right has been infringed is a matter of local IP laws and will be interpreted by the competent national courts and, in some instances, the CJEU. This underlines that the new provisions raise many legal issues which require further clarification.

Effect of the new rules

The new rules were introduced only some months ago but it has become clear that they provide a powerful new weapon in the fight against counterfeiting. The shifted burden of proof improves the position of brand owners since it leads to costs—often substantial—and practical difficulties for the counterfeiter.

Although no statistics appear to be available that focus on the influence of the goods-in-transit provisions, it is apparent that the changes have led to more seizures. Zoll aktuell, a paper published by the German customs, reported in the August 2016 edition ( No 4/16) about a seizure of counterfeit goods with a value of around €24.9 million ($26.3 million). The counterfeits came from China and were supposed to be delivered to Russia and the Ukraine. The seized goods, ranging from sports and luxury goods to electronic articles, included 37 different brands. The seizures became possible because of the amended rules on goods in transit.

Although there are reports on seizures based on the amended rules, brand owners are not yet in a perfect position to defend their rights. The changes applicable to goods in transit contained in Directive 2015/2436 have not been implemented and EU member states will have until January 14, 2019 to implement the directive and transform the rules into national trademark laws.

As the directive is not directly applicable, in the meantime national courts will have to decide whether goods in transit bearing signs similar to national trademarks infringe those national trademark rights and whether the customs authorities may detain the goods suspected of infringing national rights if there is no evidence that these goods may be diverted onto the EU market.

It should also not be overlooked that the changes of the EU trademark reform package apply to trademarks only. The Community design regulation and other EU rights have not gone through similar changes and customs authorities and national courts will continue to follow the Philips/Nokia principle in terms of infringement of these IP rights.

Ulrike Grübler is an IP partner at  DLA Piper in Hamburg. She can be contacted at: ulrike.gruebler@dlapiper.com

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