New EU Regulation Strengthens Customs Authorities’ Ability to Take Action against Counterfeits

Customs authorities in the European Union (“EU”) countries are being given new enforcement tools with the adoption on 1 January 2014 of Council Regulation No. 608/2013 (the “New Regulation”). The New Regulation provides broader options for customs authorities’ enforcement and adds new procedural options for actions on cross-border goods. Specifically, the New Regulation expands the scope of protection of rights from, inter alia, trademarks, copyrights, and patents, to also include utility models, business names, and semiconductor topographies. Further, a specialized procedure for giving notice to recipients of small consignments of infringing goods has been introduced to deal with the large number of counterfeit shipments moving across EU national borders through postal systems. Among other notable changes, the New Regulation provides a compulsory and simplified procedure for destroying goods that infringe intellectual property rights (without the need to go to court) and simplifies and speeds up proceedings by creating a uniform database of infringements to make channels of communication between the customs authorities more efficient. Importantly, the New Regulation requires that rights holders file new applications for action by customs authorities when existing applications expire.

System for EU Cross-Border Anticounterfeit Enforcement
Customs administrations play an essential role in the fight against counterfeiting in the EU market. Intellectual property rights holders (“rights holders”) can take steps to defend their rights by lodging “applications for action” with customs authorities in the EU. These applications may provide additional information to customs authorities on rights holders’ trademarks, designs, patents, or other IP rights. If action in only one EU Member State is desired, applicants can submit a “national application” by applying for action by the customs authorities of the Member State in which the application for action is lodged. This application can also be used for all types of intellectual property rights. In addition, owners of Community trademarks, Community design rights, Community plant variety rights, or designation of origin or geographical indication protected by the European Community may alternatively use the “Community application.” A Community application permits the applicant to request assistance by the customs authorities in multiple Member States.

Adoption and Scope of the New Regulation
On 29 June, the Official Journal of the EU published the New Regulation, which replaces Council Regulation No. 1383/2003, in force since 2003. Work on the revision, aimed at increasing the level of protection in the EU market from the influx of pirated and counterfeit goods, has been ongoing since 2008. During this process, IP rights holders have often highlighted the need to improve the enforcement of intellectual property rights at the borders. The changes contained in Regulation No. 608/2013 are, therefore, primarily intended to strengthen enforcement of the regulations and to expand the scope of the intellectual property rights they cover.

As with the existing regulation, the New Regulation applies to imported goods declared for release into free circulation, for export or reentry goods, shipments subject to a suspension procedure, as well as goods that are placed in a bonded warehouse in the customs territory of the EU. Importantly, the New Regulation expands customs authorities’ duty to enforce intellectual property rights to include postal deliveries (see the “Small consignments”section below).

What is not covered by the New Regulation
While sections on parallel trade and goods made by an authorized entity as original goods but in excess of the previously agreed amount were discussed, and provisions were included in early drafts of the New Regulation, the Council and the European Parliament decided not to enter these provisions in the final version of the New Regulation. Moreover, goods carried by passengers in their personal baggage continue to be excluded from the New Regulation, provided that such goods are for their personal use—and subject to local interpretations of such personal use. Goods that are only transiting EU territory are also not covered by the New Regulation, unless there is a substantial likelihood that the goods will be rerouted for sale in the EU market.

Broader scope of rights protected
One of the major changes under the New Regulation is the expansion of protection for additional types of intellectual property. Under the current regulation, protection extends to trademarks, industrial designs, copyrights, patents, supplementary protection certificates, plant variety rights, and geographical indications. Protection under the New Regulation will also extend to trade names (if protected under national law), semiconductor topographies, and utility models, as well as devices that are primarily intended for circumvention of technological measures, including components infringing any copyright or any related right. Inclusion of these additional intellectual property types will give rights holders additional bases to seek assistance from customs authorities.

Eligibility to file applications
Under the current law, only the intellectual property rights holder, its representative, or an authorized user may submit an application for customs action. Under the New Regulation, a broader set of entities is authorized to submit an application for action with customs authorities, including intellectual property collective rights management bodies, professional representatives’ bodies, groups of producers of products bearing geographical designations, representatives of such groups and businesses entitled to use a geographical designation, and control bodies or authorities for such a geographical designation. The New Regulation also introduces a distinction between persons entitled to file an application with national customs authorities and those entitled to file an application with EU customs authorities, with a third category of persons authorized to submit both types of applications.

Small consignments–destruction of postal shipments
The New Regulation introduces a novel procedure for noticing of and destruction of goods in small consignments. This change has been made in response to the growing number of infringements of intellectual property rights carried out by post, especially in the field of pharmaceuticals. Under the procedure, customs authorities inform the importer or recipient of the postal shipment of customs’ intent to destroy the shipment, and the party has 10 days to present its position, including its consent to the destruction. If the importer or recipient of the postal goods has not raised an objection within 10 days, the customs authorities may carry out the destruction by deeming such consent as implied. If an objection is raised by the importer or recipient of the goods, after completing the formalities, the customs authorities release the goods if they have not received information from the IP rights holder on the initiation of proceedings to determine whether an intellectual property right has been infringed.

Use of simplified destruction procedure made mandatory for Member States
Current law provides a simplified procedure for destruction of counterfeit or pirated products. However, use of this procedure has been optional and up to the discretion of the individual EU Member States. The New Regulation makes this procedure compulsory. Under this procedure, customs authorities will now be able to destroy goods detained at the border for infringement without the need for a judicial decision confirming the violation, if both the IP rights holder and the importer (in this case tacit consent may apply) provide their written consent to the destruction within 10 days.

Consent to the destruction of the goods is an admission that the goods infringe intellectual property rights, and under this procedure, parties may be able to avoid additional court costs and liability. If the importer does not consent to the destruction of the goods, the IP rights holder may initiate proceedings to determine whether a violation of intellectual property rights has occurred. The importer or recipient’s tacit consent—i.e. the absence of any explicit objection—within this 10-day period may, however, raise further procedural issues regarding the burden of proof, insofar as destructions may be performed by customs authorities without any judicial decision.

Information exchange between national authorities
To simplify and significantly expedite procedures, the New Regulation introduces methods for information exchange between national customs authorities and also identifies the specific types of data and information to be exchanged. A central electronic database will be used to exchange information on decisions on rights holders’ applications for action as well as national customs authorities’ actions on infringing goods. The New Regulation mandates that national customs authorities share information with the central database whenever they issue decisions granting applications for action, extend the period of protection for an application for action, or suspend a decision granting the application. These provisions for information exchange will enable customs authorities both to cooperate and act consistently with one another on anticounterfeiting efforts.

The costs of actions taken
The New Regulation provides that an IP rights holder reimburse the customs authorities for the costs incurred in carrying out enforcement activities. The rights holder can then apply for compensation from the infringer or importer and, where applicable, from its agents. These provisions on reimbursement of customs authorities by the IP rights holders as well as the ability to seek compensation from the infringer also apply to enforcement costs incurred in use of the simplified destruction procedure.

Current applications for action required to be refiled
Under the New Regulation all currently binding applications for action by the customs authorities granted in accordance with Regulation No. 1383/2003 will remain valid for the period specified in the applicable decisions of the customs authorities. The original application for action, however, may not be further extended; instead, a new application must be submitted under the New Regulation.

Implementation
The current Regulation No. 1383/2003 will expire on 1 January 2014, after which the New Regulation No. 608/2013 will come into force. The European Commission implementing regulation for the New Regulation is still pending, but is expected to issue in the coming months.