The Trademarks Act 1994 sets out the law on infringement of UK registered trademarks, providing civil remedies as well as criminal penalties in some instances.
The Proceeds of Crime Act 2002 deals with the recovery of the proceeds of crime and can be used by the courts, the police and rights holders to impose confiscation orders on convicted counterfeiters.
The EU Community Trademark Regulation (207/2009) set out the law on infringement of Community registered trademarks and provided civil remedies for infringement. However, on March 23 2016 EU Regulation 2015/2424 amending the Community Trademark Regulation took effect.
The aim of the amending regulation is to further harmonise EU trademark law, increasing the efficiency and ease of the registration procedure and ensuring coexistence between the EU registry and national registries. It is also intended to deliver stronger safeguards against counterfeiting, including enabling rights holders to prohibit a third party’s unauthorised use of a mark on packaging.
The EU Customs Enforcement Regulation (608/2013), which repealed EU Regulation 1383/2003, is aimed at improving international cooperation with industry, raising awareness of trademark infringement and responding to the increasing problem of unauthorised or counterfeit internet sales.
UK border authorities
Her Majesty’s Revenue and Customs (HMRC) is the authority responsible for national policy governing infringing goods entering the United Kingdom. This is enforced by the Border Force, which carries out frontline interventions.
The EU Customs Enforcement Regulation expressly includes trade names and confirms that counterfeiting activities extend to packaging, stickers and brochures, in addition to counterfeit goods themselves.
In April 2015 the European Commission, the European Parliament and the European Council agreed proposed changes to the EU Community Trademark Regulation, including reforms to significantly improve rights holders’ ability to tackle counterfeit products.
Historically (see Phillips and Nokia (C-446/09 and C458/09, 2011)), the seizure of goods in transit was restricted to goods that were intended to be:
- sold in the European Union;
- released for free circulation in the European Union; or
- the subject of a commercial act directed at EU consumers.
The reforms reverse this finding and permit action against counterfeit goods not intended for circulation or sale within the European Union. The burden will fall on the importer to challenge seizure by proving that the rights holder would be unable to prevent the counterfeit goods from being sold in the intended final destination. A new infringing act has been established regarding trademarks on packaging.
Application for protection
Under the EU Customs Enforcement Regulation, to enable the authorities to seize suspected infringing goods entering the United Kingdom, rights holders should file a national IP rights application for action. If the rights extend to the European Union and the rights holder wishes to ensure that goods are seized in more than one member state, it must complete an EU application for action.
No fee is payable for an application for action. Protection lasts for 12 months, extendable for a further 12 months on request.
Information to be included in the application for action is set out in Article 6 of the EU Customs Enforcement Regulation. Together with basic contact details, an applicant must provide:
- details of the IP rights to be protected;
- a detailed description of the goods protected, to assist in identification; and
- details of appointed legal and technical experts.
Rights holders should provide any information relating to known counterfeit goods either in circulation or about to enter the market, as this will assist the Border Force in identifying counterfeit goods. Examples include the identities of importers or exporters, the port of departure or arrival and known technical differences between legitimate and counterfeit products.
If goods are detained, the rights holder must cover the cost of the detention and any other reasonable costs incurred by customs authorities.
The Office for Harmonisation in the Internal Market recently developed the Enforcement Database (EDB), an interactive database that can help rights holders to protect their IP rights. Rights holders can upload information onto the database, which functions as a practical tool enabling customs and police officers to recognise counterfeit goods. The EDB can also be used by rights holders and enforcement authorities to exchange information securely.
Once suspected infringing goods have been seized, the Border Force will detain the goods and notify the importer, which has 10 days to consent or object to their destruction. In addition, the rights holder will be invited to comment on whether the goods are infringing and whether it agrees to their destruction.
The time limits pertaining to detention of goods are strict. If a rights holder does not consent to destruction, it must provide evidence of initiated proceedings (eg, a court-issued claim form) regarding the detained goods within 10 days (extendable, but discretionary). If these steps are not completed within the requisite timeframe, the goods will be released.
If no application for action is in place, the Border Force may conduct an ex-officio detention of suspected infringing goods and seek to identify the potential rights holder for one day. If the rights holder expresses an intention to lodge an application for action, the goods will be detained for 10 days and the above procedure will be initiated.
Regarding small consignments (ie, packages of fewer than three items or weighing less than 2 kilograms), the goods can be destroyed without the need to refer to the rights holder or the commencement of legal proceedings, provided that this has been indicated in the application for action.
HMRC now operates a centralised database which rights holders can access and upload information to, provided that they hold a valid IP right.
Section 92 of the Trademarks Act sets out a number of criminal offences where the offender uses a sign that is identical to or likely to be mistaken for a registered trademark that has a reputation in the United Kingdom:
- on goods for which the mark is registered;
- with a view to gain for itself (or another) or cause loss to another; and
- without the consent of the proprietor.
These offences include applying such a sign to goods or their packaging; and selling, offering for sale or distributing goods which bear such a sign. The offender is liable to a penalty of up to 10 years’ imprisonment and an unlimited fine. A defendant must show that he or she believed on reasonable grounds that the use of the sign was not an infringement of the registered trademark.
The Police IP Crime Unit (PIPCU) is a specialist police unit set up to tackle serious and organised IP-related crime in the United Kingdom, with a focus on offences committed online. PIPCU investigates and prosecutes serious offenders and has the power to seize assets and shut down websites hosting infringing material. For example, in May 2015 three men were arrested by PIPCU for exporting $10 million worth of fake Cisco networking equipment to the United States.
Trading Standards is principally responsible for enforcing criminal offences involving trademark infringement, with support from the police. Upon receipt of a complaint, Trading Standards will decide how to proceed. Limited resources means it may deal with only the most serious cases. Rights holders have no control over the speed of proceedings brought by Trading Standards – or indeed, whether it decides to progress a complaint. It is therefore vital to assist Trading Standards from the outset (eg, by providing all evidence gathered in respect of suspected criminal activities).
A rights holder may also bring private criminal proceedings. This allows it to retain control over proceedings. The penalties accompanying such prosecutions may serve as more of a deterrent to a counterfeiter than civil proceedings. However, while slower, making a complaint to Trading Standards can be more cost effective. The burden of proof in criminal proceedings is higher than that in civil proceedings, as the rights holder must demonstrate that the offence has been committed beyond reasonable doubt, instead of on the balance of probabilities. Finally, the rights holder should bring private criminal proceedings only if it is prepared to go to trial, as – unlike in civil proceedings – it is impossible to settle the case once proceedings have been commenced.
The ways in which a trademark can be infringed are set out in Section 10 of the Trademarks Act (for UK registrations) and Article 10 of the EU Community Trademark Regulation (for Community registrations). The rights holder often need not show a likelihood of confusion on the part of the public in relation to counterfeit goods, provided that it can demonstrate that a sign identical to the trademark has been used in the course of trade in respect of goods identical to those covered by the trademark. Where the sign or goods are similar rather than identical, the rights holder must demonstrate a likelihood of confusion (including a likelihood of association) on the part of the public.
Trademark infringement claims are heard by the Chancery Division of the High Court. Where the claim is high value or complex, it will normally be heard by the Patents Court. Lower-value claims are usually dealt with by the IP Enterprise Court, which provides a more streamlined and cost-effective forum.
The first step in enforcing a trademark in relation to counterfeit goods is to send a cease and desist letter. Alternatively, interim measures may be available to the rights holder immediately before issuing a claim (often within a few days). These include:
- a freezing order to restrain the infringer from disposing of or dealing with its assets;
- a search order to allow the rights holder’s lawyer to enter the infringer’s home or business premises to search for and seize specified goods or documents; and
- an interim injunction to restrain the infringer from continuing its infringing acts.
Freezing orders and search orders require the rights holder to demonstrate a real risk that the infringer will dispose of its assets or destroy evidence. However, an interim injunction requires urgency. The rights holder must demonstrate that:
- there is a serious question to be tried;
- the rights holder would not be adequately compensated by damages (if successful at trial);
- the infringer would be adequately compensated by damages if the rights holder is unsuccessful at trial (since, as a condition of the order, the rights holder must give an undertaking in damages if the injunction is found to be unjustified); and
- the balance of convenience between the parties favours an injunction being granted.
In some circumstances a rights holder can have its claim decided at a hearing without the need for a full trial, thereby saving costs and obtaining a quicker result. A judgment in default may be available to the rights holder if the defendant does not file its defence by the required deadline; and a summary judgment may be available if the defendant has no real prospect of success and there is no compelling reason why the case should go to a full trial.
If the rights holder is successful (whether at full trial or following summary or default judgment), the court may grant the following remedies:
- an injunction to prevent future infringement;
- payment of damages or an account of profits;
- delivery up or destruction of the goods; and
- payment of a proportion of the claimant’s legal costs.
Unauthorised internet commerce
The anonymity of the Internet facilitates the sale of counterfeit goods online. As part of its enforcement and brand protection strategies, a rights holder may budget for and tactically register a portfolio of domain names which includes its exact trademark (or misspellings), typically with descriptive words such as ‘store’, ‘shop’, ‘outlet’ or ‘discount’. This prevents third parties from engaging in unauthorised internet commerce at domains which include the rights holder’s trademark or which may mislead the consumer into believing that the sale of those goods is authorised by the rights holder.
Takedown or recovery options depend on what action is being carried out by an infringer and will depend on various considerations, including the nature of the top-level domain (TLD) – whether generic (eg, ‘.com’, ‘.org’, ‘.net’) or a country-code TLD (eg, ‘.uk’).
Helpfully, software is available to enable rights holders or their lawyers to monitor for new infringing domain name registrations and other infringing uses.
In addition, PIPCU can take down and suspend websites which engage in the sale of unauthorised or counterfeit goods. To do so, it requires a short statement on behalf of the rights holder, confirming that unauthorised internet commerce is taking place and identifying the domain name. Rights holders (or their lawyers) can also work with PIPCU to monitor against infringement of a brand. This powerful weapon has been offered since PIPCU’s inception in late 2013, affording rights holders a quick, cost-effective way of shutting down infringing sales without the need for expensive injunctions or lengthy court cases.
The domain name associated with a suspended website will eventually expire and become available for registration by another third party. There are ways of monitoring this if a rights holder is keen to secure the domain when it becomes available.
If an infringing domain name has been registered but no website is available, the starting point is to look at ownership details for the domain. For ‘.uk’ domains, the WHOIS details are on Nominet’s website (the registry for ‘.uk’ domains). If the contact details look false, Nominet can require the registrant to verify its contact information on behalf of a rights holder. If the registrant fails to do so, Nominet has the discretion to suspend the domain name (with expiration approximately 12 months later). This is useful where a rights holder suspects that a domain may be used for unauthorised internet commerce in the future.
If the contact details are genuine, a rights holder’s recourse will be limited to writing to the registrant to seek to recover the domain and obtain a promise not to infringe the rights holder’s rights in the future or sell counterfeit goods.
Where the registrant does not reply or refuses to comply, the rights holder can file a complaint to seek to recover the domain name or escalate the dispute to litigation, which will provide the rights holder with a greater range of potential remedies. These include injunctive relief against the registrant and recovery of damages and legal costs.
Crucially, the rights holder can also obtain an order from the court requiring unconnected third-party intermediaries (eg, internet service providers (ISPs)) to comply with the court order and disable and delete any unauthorised website or transfer any infringing domain name to the rights holder.
Such orders of the English High Court can be successfully enforced against ISPs internationally.
An ISP, as an independent third-party service provider, will typically not respond to a takedown request without a sealed court order (in order to protect itself from liability towards its customers). Although the court will grant orders against ISPs to prevent sales of counterfeit goods or other infringing activity, it will do so only where such an order is necessary and proportionate; further, the language may be narrowly drafted to prevent the rights holder from enforcing the order against any domain names or websites not expressly identified in it.
Online investigation strategies
Before undertaking any of the above actions, it is useful to conduct online investigations into the infringer. A WHOIS search can identify the owner of the domain. Some registrants conceal their identity using a privacy protection service. Where a ‘.uk’ domain name infringes a rights holder’s rights (whether because of the nature of the domain or because counterfeit goods are being sold), the rights holder can write to Nominet and request disclosure of the registrant’s contact details (which Nominet can provide under the Data Protection Act 1998). It is harder to obtain contact details for a non-‘.uk’ domain name – but not impossible. There are various investigative strategies available and giveaways on websites which can identify the registrant (including the registrant’s IP address).
Other online investigative strategies include a ‘reverse WHOIS’ search, which enables the identification of all domain names owned by a particular registrant. This can be useful where a registrant is systematically registering domain names which infringe third-party rights or operating seemingly unauthorised websites for more than one brand, as this can be persuasive evidence of liability.
Finally, social media can reveal significant information about an infringer and its activities, sales, sources and profits – all of which can be extremely useful when negotiating settlement and determining an acceptable settlement fee as an alternative to litigation.
Rights holders can minimise risk though a number of internal preparatory steps. Documenting who has access to what confidential information can help to narrow the list of suspects when information is leaked. Forming a crisis team, with key employees trained and empowered to respond quickly and with clear lines of reporting, can ensure that situations are dealt with efficiently. Key documentation should be prepared in advance (eg, template letters before action). Fostering cross-communication between business units can help to identify what a counterfeit looks like and where higher levels of risk lie within the supply chain.
In addition, putting in place an effective strategy to monitor supply chains actively can prove critical. Third-party investigators can be utilised, both for preventive monitoring and for conducting trap purchases to generate leads and narrow the focus of an investigation. Developing a reputation for swift and decisive responses to potential counterfeits can serve as its own deterrent.
Concurrent with internal investigations, rights holders should use available legal processes strategically. For example, certain jurisdictions (eg, Germany) may prove easier when seeking an interim injunction, whereas others (eg, the United Kingdom) allow for pre-action information gathering from third parties, which may prevent tipping off counterfeiters at an early investigative stage. Freezing injunctions to prevent disposal of assets, interim injunctions and search and seizure applications to remove goods from circulation can all be evaluated as part of formal legal proceedings. Criminal proceedings may also be an option, but rights holders have little to no control over the pace of such actions.
Sarah Wright, Anoushka Sandry & Joel Vertes
This article first appeared in World Trademark Review. For further information please visit www.worldtrademarkreview.com.