Summary and implications

The Court of Justice of the European Union (CJEU) has ruled that fake goods arriving from outside the EU, supposedly en route to other non-EU countries, cannot be confiscated unless there is proof they are intended for sale in the EU.

The courts will only be able to act against counterfeit or pirated products with evidence of EU-related commerce such as:

  • goods sold to a customer in the EU;
  • goods offered for sale or advertised to consumers in the EU; or
  • documents concerning the goods indicating that their diversion to EU consumers is envisaged.

This interpretation of EU law in the joined cases of Philips Electronics v Lucheng Meijing and others and Nokia Corporation v HMRC will be troubling to brand owners. It will also be worrying for consumers in non-EU territories of sub-standard products which are inspected and known to be fake by Member States’ customs authorities, but which have to be released.

To read the full judgment click here

In its judgment the CJEU did, however, give wider guidance to EU Customs considering whether to detain goods to determine whether infringement of EU rights has occurred. Sufficient suspicion may arise where:

  • the destination of goods is not declared;
  • there is no accurate or reliable information as to the identity or address of the manufacturer or consignor of goods;
  • there is lack of co-operation with customs authorities; or
  • documents suggest goods may be diverted to EU consumers.

If these indications are not found by EU Customs and in the absence of other legitimate reasons permitting detention such as breach of EU safety regulations, goods must be released for onward shipment to their intended non-EU destination.

Background

The judgment follows two separate referrals concerning goods detained in Belgium and in the UK.  

In Philips, Belgian customs authorities inspected a cargo of electric shavers from China which were bound for an unspecified destination and being temporarily warehoused at Antwerp port. The shavers resembled designs protected by Philips in the EU and were detained as “pirated goods” by Belgian Customs pending Philips’ claim against the Chinese manufacturer and importer.

In Nokia, UK Customs at Heathrow Airport inspected a consignment of mobile phones and accessories bearing Nokia’s marks. Suspecting the goods to be fake, UK Customs sent Nokia a sample from the consignment for testing. However, when Nokia confirmed the phones were not genuine, UK Customs refused to detain the goods further on the basis they were in transit – from Hong Kong to Colombia – and so did not fall under the EU regulations’ definition of “counterfeit”.  

The EU Customs Regulation is concerned with the enforcement of intellectual property rights. The CJEU therefore had to consider whether goods originating in non-EU countries, but which are being transhipped or temporarily warehoused in the EU, can be classified as “pirated” or “counterfeit” and infringing such rights when they are brought into the customs territory of the EU but not marketed or sold there.  

What next?

How strictly and uniformly Member States’ customs authorities and courts will apply this judgment remains to be seen. Some Member States may take a less rigorous approach and accept limited evidence that fake goods are EU bound, so that where there is no opposition fake goods will still be destroyed under the Simplified Procedure. Other Member States may be more conservative in seeking to avoid potential claims against them from importers of detained or destroyed goods. The concern for brand owners will be that counterfeiters will know which Member States are a soft touch and will therefore choose to route goods through them.  

The current draft of the proposed new Customs Regulation does not directly address the issue of goods in transit, but revisions are being considered. Reform of the EU’s IP Rights Enforcement Directive is also proposed following consultation last year. Brand owners will be looking to the European Commission to introduce clear measures to combat the problem of fake goods being allowed safe passage through Europe.