EU: Court of Justice rules on detention by customs authorities of imported goods infringing intellectual property rights, EU …

The EU's Court of Justice recently delivered a ruling that should interest enterprises exporting products either directly to or via the European Union. The Court has set out the specific conditions according to which goods coming from non-EU countries, which are imitations or copies of goods protected within the EU by intellectual property rights, can be detained by the customs authorities of Member States.

The ruling was delivered in respect of two separate but similar sets of facts. In the first case, a cargo of electric shavers imported from Shanghai was seized in the port of Antwerp by the Belgian customs authorities and detained. The cargo lacked a stated destination and, moreover, resembled shavers designed by Philips, whose designs are in fact protected by registered intellectual property rights in a number of Member States, including Belgium. Philips brought an action against three Far Eastern companies, seeking a declaration that its rights had been infringed, in addition to damages and the destruction of the detained goods.

In the second case, the UK customs authorities seized a consignment of mobile phones and accessories imported from Hong Kong and destined for Colombia. The goods bore a sign identical to the trademark of Nokia, who requested that the goods be detained. However, the authorities refused Nokia's request, on the grounds that the goods were in transit from one non-EU state to another, and therefore could not be regarded as "counterfeit goods" for the purposes of EU law. Nokia challenged this refusal.

Both the Belgian and UK courts decided to seek a preliminary ruling (a request to the EU Court of Justice to clarify the interpretation of a particular point of EU law) on this matter. They asked the Court whether goods from a non-EU state which are in transit or warehoused by customs authorities within the EU can be classified as "counterfeit/pirated goods" under EU law merely on the basis of the fact that they are imported into the territory of the EU, without being actually marketed or sold there.

Addressing both cases together, the Court held, among other matters, that customs authorities are entitled to seize such goods where there are indications that operators involved in the manufacture or export of those goods are about to direct them towards EU consumers, or are disguising their commercial intentions. Exporters should take note of these indications, which can include (i) undeclared destination of the goods (ii) lack of reliable information as to the identity/address of the manufacturer or (iii) lack of cooperation with customs authorities.

In addition, the Court confirmed that products, in respect of which it is not proven that they are intended to be put up for sale in the EU, cannot be classified as "counterfeit goods". The Court's ruling highlights the lack of regulation in this specific area and has occurred against the backdrop of ongoing efforts among the EU institutions to resolve the issue.

On 22 November 2011, the European Parliament's Committee on the Internal Market held a hearing during which experts emphasised once again the urgent need for clarification on the status of consignments or goods in transit. It is considered that the continuing legal void will ultimately benefit counterfeiters who can declare their goods as "transiting" in order to sell them off more easily within the EU.
Traders should note that a proposal for a regulation on customs enforcement of intellectual property rights is expected to be adopted in the near future. While intending to lessen administrative burdens for customs authorities, the legislation is also likely to bring long-term benefits to foreign traders by preventing the proliferation of pirated goods within the European Union.

In the meantime, traders should pay heed to the recent Court ruling by ensuring that the destination of any consignments, either to or via the EU, is clearly marked and that they cooperate fully with customs authorities.