The Saudi case: working with the GCC's new unified trademark law

The Kingdom of Saudi Arabia, by acceding to the World Trade Organization, has joined the other Gulf Cooperation Council states that constitute the Customs Union.

Being full-fledged members of the WTO, the states are obliged to implement the WTO’s agreements such as the Agreement on Trade-related Aspects of IP Rights (TRIPS).

To implement that obligation the GCC states have to include what has been set out in the TRIPS Agreement in their national legislation, a step that requires the amendment of current laws and the enactment of laws that conform to the TRIPS Agreement, in so far as it contains special provisions intended to protect the minimum standard of intellectual property rights on borders (trademarks and copyrights).

Each member of the GCC states has adopted certain procedures to secure border protection of trademarks. The KSA has issued Regulations for Border Protection of IP Rights (RBPIPR) pursuant to the Minister of Finance’s Order No. 1277, 2005. These regulations make it imperative on the customs department to implement the order and the ensuing regulations at border checkpoints to stop commodities that infringe trademarks rights or copyrights from entering the country.

In their endeavour to unify legislation, the GCC states have enacted a unified Trademark Law that has not yet been put into effect because the Commercial Cooperation Committee (CCC) has not sanctioned its implementing regulations.

The Kingdom of Bahrain and the Sultanate of Oman have expressed reservations towards the law that could not be incorporated into the regulations. Consequently, a unified Law for Trademarks consisting of 52 articles has been re-issued. Chapter 5 of the law (Articles 38 to 41) complies with the TRIPS Agreement (Articles 51 to 60).

"The law forbids clearance of the goods in question for marketing purposes and bans re-export of the same by the mere removal of the disputed trademarks."

Pursuant to Article 6 of RBPIPR, the owner of a trademark has the right, at any time before lodging a civil or criminal case, to seek issuance of a judicial order by the Board of Grievances (at the concerned authority).

The order should be based on a complaint, substantiated by an official certificate confirming the registration of the trademark, and plainly instructing the custom authorities to seize goods subject to a counterfeit trademark similar to the plaintiff’s. It also bans clearance of the products under Article 49 of the Trademarks Law.

As soon as the unified law comes into force (within six months from the date of its regulations being sanctioned by the CCC) the national legislation of some member states will undergo the necessary amendments. The RBPIPR is a case in point. The law has conferred more protection to trademarks at borders. The main characteristics of the law can be summarised as follows:

1. It entitles the trademark owner to approach the concerned customs authority to stop clearance of commodities related to the disputed trademark, because issuing a judicial order to that effect would take considerable time.

2. It obliges the concerned authority to pass a decision as regards the owner’s application within seven days of submission and to notify the applicant of the outcome.

3. It empowers the concerned authority to demand a reasonable bond or guarantee to safeguard the interests of the adversary and the concerned authority.

4. It confirms the concerned authority’s power to stop, of its own accord, clearance of commodities prima facie suspected of carrying counterfeit trademarks (Article 2 of the Procedures of the Saudi Customs Regulations refers to a similar action).

5. It gives the concerned authority the right to issue an order to stop clearance of imported commodities or transit goods or goods prepared for export upon their arrival at the customs area in its domain, provided that it is apparently evident that these goods are counterfeit or unjustifiably carry trademarks similar to a registered trademark.

This is undoubtedly an added and strict protection measure. However, the TRIPS Agreement has allowed WTO members to apply some exceptions as regards its application to transit goods and goods prepared for export. The Saudi customs authority has detected some cases of smuggling counterfeit goods, depicted as transit goods, to other countries.

6. To ensure transparency and do justice to both the trademark owner and the importer of the goods suspected of infringing the rights of the trademark owner, the law requires the clearance authority that halted clearance of the goods in issue to take the following steps:

a) To immediately notify the importer and the trademark’s owner of its decision to stop clearance of the goods. The RBPIPR conforms to the law in specifying a period of 10 days for the trademark owner, from being notified of the restriction, to institute proceedings with notice to the customs authorities, otherwise the restriction will be null and void unless the competent court sees otherwise (applies TRIPS).

b)
To notify the trademark owner, upon his written request, of the names and addresses of the consignee of the goods, the importer, to whom the consignment is sent and the quantities (such action is a valuable advantage in pursing infringers of trademark rights).

c)
To allow those concerned to inspect the goods pursuant to the customs procedures to that effect.

7. The unified Trademark Law makes it imperative to destroy commodities that violate trademark rights at the importer’s expense or to get rid of the same in any manner except by sale if destruction of such commodities is perilous to the environment or public health (such action conforms to the TRIPS Agreement and the Saudi border procedures).

8. The law forbids clearance of the goods in question for marketing purposes and bans re-export of the same by the mere removal of the disputed trademarks (this is in conjunction with TRIPS). The TRIPS Agreement allows making a change in the commodity’s condition in exceptional cases, to merit re-export, but it is silent regarding the re-export of a commodity without changing its condition. It is left to member states to judge the circumstances that merit such actions, particularly in cases of earthquakes and floods where time is of the essence.

9. Article 39 of the law allows non-compliance with border procedures in exceptional cases, namely:

a) Small non-commercial quantities of goods included in the personal effects of travellers or goods sent in small parcels.

b) Goods circulated in the exporter’s country markets by the trademark owner or through his consent (the two exceptions are specified in the TRIPS Agreement).

The above-mentioned are temporary procedures and are by no means a determination of the aggrieved party’s case. According to TRIPS, the aggrieved party should lodge a civil suit against the perpetrator before the competent court within 10 days of being notified of seizure of the goods by the customs authorities (also specified by Saudi border procedures). Article 40 of the Trademarks Law entitles the aggrieved party to seek an interlocutory injunction to safeguard its interests pending determination of his case.

The court should determine the case within 10 days of its being filed and may order the plaintiff to provide a reasonable bond to safeguard the defendant’s interests.

Article 41 of the law entitles the aggrieved party that suffers a direct harm as a result of a violation to claim damages and leaves it to the court to quantify the damages, putting in mind profits generated by the violator. The article also entitles the aggrieved party to seek redress from all parties that colluded in the violation by providing the court with adequate information as to the identity of the collaborators and means of disposal of the goods in question.

Promulgation of the law and its implementation will provide better protective measures to trademark owners at borders to all GCC states, particularly the KSA. The law confers considerable advantages on legitimate trademark owners. It entitles them to seek seizure of the disputed goods by customs authorities if provided with suitable grounds. The Saudi customs authority, which was ranked number one in 2012 in combating commercial fraud and protecting IP rights out of 179 member states that constitute the World Customs Organization (WCO), is keen to maintain standards.

The illegal goods detected by the Saudi customs authorities in 2012 represented 36.5 percent of goods detected by all members of WCO in the same year. The US customs authorities secured second place by detecting 14.9 percent, Chile third with 10 percent and Italy fourth with 7 percent (source: the report of illegal trade for 2012 issued by WCO). The KSA came first in 2011 by detecting 12.5 percent of the total counterfeit goods and violations of IP rights in member states in that year.

The Trademarks Law will come into force upon issuance of its implementing regulations and upon being sanctioned by all the GCC states. In addition finance ministers, in coordination with concerned ministers, will issue orders specifying the terms and conditions that govern procedures for handling applications that restrict clearance of disputed goods by customs authorities in the GCC states.

Khalil Aljehani is the founding lawyer of Khalil Aljehani Law Firm. He can be contacted at: khalil@aljehani.com.sa