Background
Claims and Proceedings
Decision
Comment
The Supreme Court recently held that an action for ordering counterfeit goods to be destroyed could be proceeded against the forwarding agent, regardless of the fact that the agent had not been found liable for trademark infringement.
In July 1998 Finnish customs detected counterfeit garments affixed with a well-known registered trademark. The counterfeit goods had been shipped from South Korea and were in transit through Finland, destined for Russia. The manufacturer, shipper and final addressee of the cargo were unknown. Therefore, the owner of the infringed trademark took action against two forwarding agents, one indicated as the consignee in the shipment's consignment note and the other responsible for forwarding the goods to Finland.
In its claim, the right-holder demanded that the goods be confirmed as counterfeit and destroyed. In addition, the plaintiff claimed compensation for legal costs, but presented no claims for damages or for penalties.
Both the district court and the court of appeal found that the forwarding agents had not infringed the trademark rights of the plaintiff, and therefore dismissed the plaintiff's action. The lower courts considered that the mere carrying and forwarding of counterfeit goods does not amount to "using the mark as a symbol in commerce", which constitutes trademark infringement under Finnish trademark law.
Like the district court and the court of appeal, the Supreme Court held that the forwarding agents had not infringed the trademark rights of the plaintiff. However, it allowed the action by referring to EU Council Regulation 3295/94, which establishes measures to prohibit the release for free circulation, export, re-export or entry for a suspension procedure of counterfeit and pirated goods. In its judgment the court referred to the preambles of the regulation, which state that as the marketing of counterfeit and pirated goods causes considerable injury to manufacturers and traders, these goods should be prevented from being placed on the market, and measures should be adopted to deal effectively with such activities.
The Supreme Court acknowledged that the starting point is to bring an action against the actual infringer of the trademark rights, but admitted that in transit traffic it is common that the identity of the manufacturer, seller, purchaser or other possible infringer is unknown. Thus, the denial of an action against a forwarding agent would result in the release of the counterfeit goods. The court considered this to be clearly against the main objective of the counterfeit regulation, which is to keep counterfeit goods out of the market.
Accordingly, the Supreme Court held that as the forwarding agent has control over the goods while they are in Finland and as the infringer was unknown, it is appropriate that an action for ordering the goods to be destroyed can be brought against it. Since it was undisputed that the detained goods were counterfeit, the action could be allowed and the goods ordered to be destroyed.
However, the court rejected the plaintiff's claim for compensation for legal costs in the matter. The court stated that the forwarding agents' position was reminiscent more of a party to be heard than that of a defendant, since the forwarding agents had not been found to infringe the plaintiff's trademark rights. The position of the agents was held to be exceptional, due to the fact that there is no express legal provision that would deem a party who is merely responsible for forwarding counterfeit goods to be a defendant in this type of counterfeit case. Accordingly, the court held that the forwarding agents were not liable to compensate the plaintiff for legal costs.
According to a dissenting opinion, the forwarding agents should have been liable to pay legal costs, as they had not disclosed the identity of the principal for the benefit of whom the forwarding was made, nor had they indicated anyone who would have better right to the goods.
The precedent can be considered important for right-holders, as it facilitates legal proceedings in transit traffic cases, where the right-holders are, as a rule, aware of the identity of the forwarding agents of the counterfeit goods, even though other responsible parties remain unknown.
In addition, the case seems to support the practice commonly applied amongst right-holders in transit traffic cases. The right-holders have already in the past concluded voluntary settlement agreements with forwarding agents to have counterfeit goods destroyed. Since the precedent acknowledges the possibility of bringing a legal action against the forwarding agent provided that other infringers are unknown, it may be argued that the forwarding agent is also competent to enter into a voluntary settlement agreement with the right-holder for destroying the goods to avoid legal proceedings.
For further information on this topic please contact Rainer Hilli or Jenni Kyntölä at Roschier Holmberg, Attorneys Ltd by telephone (+358 20 506 6000) or by fax (+358 20 506 6100) or by email ([email protected] or [email protected]).