Trade sharks

The European anti-fraud office, the OLAF, claims that the EU is awash with IP right (IPR)-infringing goods. The OLAF has reported a 1,000 per cent increase in the volume of goods seized between 1998 and 2004, including protected products such as handbags, hats, sunglasses, mobile phones and pharmaceuticals. This has prompted the European Commission to call for more integration in its policy of common customs enforcement, but there is no evidence that the current system of European Community (EC)-wide IPR monitoring is working any better than the various national systems.

Part of the problem is that the EC approach varies depending on how the goods in question come to be in commerce outside the EC. Under Council Regulation (EC/1383/2003), parallel goods put on the market outside the EU with the consent of the brand owner, and overrun goods entering the EC market without an importation licence, are not subject to the customs controls, even though they would be infringing goods once they are within the borders of a member state.

The effect of this odd provision is compounded by the recent decision of the European Court of Justice in Class International v Colgate-Palmolive (2005), where the court held that goods in a customs warehouse in Rotterdam were not “on the market” for IPR enforcement purposes. It held that prohibitions against importing without a license apply to bringing goods onto the internal market and not just bringing those goods to an EC customs warehouse.

To make matters more confusing, and despite the Council Regulation having direct effect throughout the EC, individual member states are supposed to apply the regulation through their national laws. The result was bound to be disharmony between national interpretations.

In Hewlett-Packard v Expansys (2005), and again in Sony v Electricbirdland (2005), the English High Court ruled that the burden of proving specific consent for importation into the European Economic Area was on the importer and that general consent for resale elsewhere in the world was not enough to defeat an allegation of trademark infringement. This leaves HM Revenue & Customs enforcement powerless to label goods in its warehouses as being ‘on the market’ without a licence, but also unable to clear those goods for release into the UK unless the importer can show they have specific consent from the IPR owner for the importation, while the question does not even arise until the goods cross the boundary line from customs to the EC. The IPR owner, meanwhile, would presumably have to stand outside the Customs warehouse and watch to see in which direction the goods eventually go.

Another example is provided by differences in the treatment of different IPRs. In Sony v Electricbirdland, the court granted the trademark owner an EC-wide injunction against the defendant’s further infringements of the marks in issue. In his opinion in Roche Nederland v Primus and Goldenberg (2005), the Advocate-General suggested that, for jurisdictional reasons under Article 6(1) of the Brussels Convention, cross-border injunctions relating to national patents derived from a European Patent Convention application are unenforceable anywhere except in the member state where the injunction was granted.

So it is the case that trademark-related injunctions issued by national courts are enforceable throughout the EC, but patent-based injunctions are not, and IPR owners and Customs enforcement agents have to wait until imported parallel goods are actually being commercialised within the market before their infringing status can be determined. It is hard to see how EC legislation has improved Customs’ enforcement.

Giles Crown is a partner and Thomas Hays a consultant at Lewis Silkin