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The flow of fakes

Plans are afoot to update European customs laws, in order to assist brand owners in the battle against the flow of counterfeit goods into the European Union.

EU customs authorities currently play a vital role in the frontline of this battle; last year, 115 million suspect articles were detained at the EU’s borders.  The total value of the equivalent genuine products was €1.2 billion, including €273 million worth of watches, €116 million of clothing and €94 million of bags, wallets and purses.  The most dramatic increase was in imports of counterfeit shoes – which had an equivalent genuine value of €163 million.  In 90% of detentions, the goods detained were destroyed; in only 3.5% of detentions did the goods turn out to be genuine.

The dramatic upsurge in detentions over the last few years is largely attributable to the increased numbers of online purchases made by EU consumers from the Far East.  The vast majority of counterfeit products came from China, which accounted for 81% of counterfeit clothing garments, 86% of clothing accessories, 82% of counterfeit shoes and 92% of handbags and purses.

While existing EU customs laws enable authorities to detain vast quantities of counterfeit goods, it is recognised that more could be done.  In particular, Customs authorities presently cannot detain (i) parallel imports (that is, goods which, although genuine, were only intended by the brand owner for sale outside the EU), (ii) goods which bear a confusingly similar (as opposed to an identical) mark to a registered trade mark, or (iii) goods which bear a brand that, although well-known, is not registered as a trade mark.

It is presently being debated whether the proposed new regulation will apply to parallel imports – after initial encouraging signs, recent amendments to the draft legislation indicate the European Commission is resiling from its initial aim of filling this lacuna in border controls.  More understandably, the new regulation will continue to only enable customs authorities to detain goods which infringe design rights (either registered or unregistered) if they are exact copies of the design.  However, it does appear that protection will be afforded to unregistered trade marks.

The draft regulation does promise a far more workable way of dealing with small consignments.  If the brand owner ticks a box when filing its annual customs form, the authorities will have the power to destroy small consignments without involving the right holder (or its lawyers) at all.

Regrettably, the new regulation will still not enable customs authorities to detain goods carried in passengers’ personal hand luggage, if those goods are for personal use.  However, if the quantity of goods suggests that the passenger is importing them for commercial ends, customs authorities can detain them.

The new regulation will not change the recently clarified law on customs powers to deal with counterfeit goods which are in transit.  Customs authorities cannot seize goods which are merely passing through the EU, en-route from a non-EU country to another non-EU country, unless there is evidence that those goods are actually intended for the EU market – for example, a sale, or an offer to sell, those goods to an EU consumer.  Customs authorities can, however, pass information regarding the goods to their counterparts in the destination country. Further, following the ground-breaking 2011 case of Lucasfilm v Ainsworth (known as the Star Wars case), it should be possible to take UK court action to have the goods declared infringing (and thus disposed of) under the laws of the non-EU destination country - meaning that those goods never make it out of the UK.

If you would like more information regarding this Briefing, please contact Peter Nunn.