European Union: Combating IP Piracy And Counterfeiting In The European Union: The Strategic Use Of Confiscation

Last Updated: 31 May 2007
Article by Christian Falk

Piracy and counterfeiting by entities operating in non-EU member states is causing considerable damage to the intellectual property of companies operating in the EU. Manufacturers of branded goods must therefore do everything in their power to protect themselves. One option worth considering is coordinated confiscation of infringing goods throughout the EU – including confiscation at trade fairs.

Companies, especially branded-goods manufacturers, have spent considerable time and financial resources in acquiring intellectual property: trademarks, patents, copyrights and related protection for their goods and services. When their IP rights are violated, companies may experience losses of various types: lost profits, damage to or dilution of their product reputation and the loss of market share. In addition, manufacturers can also fall victim to unjustified guarantee claims made by consumers deceived by counterfeiters, the defense of which can be time-consuming and costly.

Thus, consumers are also affected by counterfeit goods. They are misled about the real origin of the goods and their quality, and may suffer losses or damage to their health due to the inferior or defective quality of counterfeit goods.

When the owners of IP rights react to IP infringements – i.e., in response to pirated products brought onto the market – the remedies available are limited in scope and have only a so-called "stoppage" character. By involving national courts and obtaining a forbearance title, for example, such "after-the-fact" IP enforcement actions offer protection only for the future after the copyright or patent holder has been harmed. In order to prevent the importation of counterfeit goods into the EU domestic market, an increasing number of manufacturers are using confiscation procedures across the EU. That way they prevent pirated products, which mainly come from abroad, from reaching the retail trade in the first place and likewise from reaching consumers in the European Union.

The effectiveness of confiscation as a means to combat IP piracy is clear. In 2006, for example, German customs officials seized illegally copied goods valued at €1.2 billion. That was over five times more than in 2005 (€213.4 million). The number of seized products rose by 400% compared with the previous year. Some 525 owners of IP rights acted proactively in 2006 and filed a confiscation application, and the protective rights of 290 of them were found to have been violated by counterfeit products. Thus, fully 55% of the submitted confiscation applications yielded results for the holders of IP rights – an excellent (German) success rate.

One special area of application for EU-wide seizures is international trade fair exhibitions, at which innumerable innovations and trends in completely different sectors of the market are presented. On the one hand, imitators use this platform intensively as a source of information for future acts of piracy. On the other, an increasing number of forgeries are exhibited at international trade fairs that are very difficult to differentiate from the original. As a result, trade fairs in the EU are increasingly becoming a focal point of interest as for identifying pirated goods and enforcing IP rights.

Various "self-protective measures" are recommended for participants in EU trade fairs. For example, if the company’s IP rights for brand names and products have not been registered, they should at least be reported to the responsible registry before exhibition at a trade fair. If no IP rights have been registered, a so-called priority certificate can be issued free of charge by the trade fair's legal department. This confirms that a certain product is being shown at the exhibition for the first time.

In the event of an existing falsification risk, it is also recommended that an EU confiscation application be submitted to customs authorities. This is because action on the part of the EU customs authorities is not limited to customs clearance. As far as IP rights are concerned, the customs authorities have access and action rights in all cases where they are conducting their customs monitoring and examination rights. Among other things, this is the case at border control points, inland customs offices, free trade ports of controls by mobile control groups – and also at trade fairs. For example, 1,500 forgeries were found in one day during a raid at the "Paperworld" trade fair in Frankfurt, Germany and were seized by the customs authorities.

When the EU confiscation application is submitted centrally to a national customs office, all EU customs authorities are alerted. EU customs authorities then note whether shipments that are imported include goods that infringe IP rights. Search successes increase if detailed information is given on possible imitations and specific features of the original. If goods are discovered that infringe IP rights, the corresponding customs authority initially retains the goods for further examination and informs the holder of the IP right. The latter is then given an opportunity to verify the suspicion. If goods that infringe IP rights appear in trade within the EU – i.e., not in connection with a third country – confiscation is possible in accordance with national regulations (if appropriate, also in the case of gray and parallel imports and imports breaching license agreements). In most cases, this is followed by judicial proceedings in order to establish the IP right infringement. The customs authorities only have a holding function – that is, the owner of the IP right has to document the effective protection of his rights either out-of-court by obtaining a cease-and-desist declaration and formal obligation from the infringer under penalty of law, or must take judicial action if necessary. Confiscation applications remain in force for only 12 months, but may be renewed each year.

During a trade fair, companies should establish contact with the customs authority with regard to seized goods and should walk around the trade fair on the first day in order to identify and prohibit imitations and forgeries. If infringing goods are identified in this process, speedy action must be taken. First of all, an attempt should be made to obtain an (out-of-court) cease-and-desist declaration and formal obligation from the infringing exhibitor under penalty of law. Among other things, this has the objective of immediately destroying the infringing goods. If this is not possible, the owner of the IP rights must obtain an interlocutory injunction from a court as soon as possible in order to preclude any further exhibition or sale of the counterfeit products. Also, when a confiscation application is on file, customs authorities will contact the owner of IP rights if and when infringing products are identified.

If goods are seized by the customs authorities and if the seizure of the infringing goods is challenged, the owner of the IP rights must enforce his claims judicially within two weeks. A legally executable title has to be acquired within four weeks (normally in the form of an interlocutory injunction) that outlines how the seized goods are to be held and/or destroyed. Destruction of the seized goods is also normally the case if an IP right infringement has been judicially established.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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