The latest statistics for 2015 show that the number of seizures and detentions of counterfeit goods – following consecutive drops since 2012 down to 1,293 in 2014, thanks to increased information campaigns launched by Austrian Customs – rose again, doubling to 2,771. However, the number of articles seized dropped from 195,689 in 2014 to 44,832 in 2015.
The reason for this increase in the number of seizures and simultaneous decrease in seized volumes is the general rise in online trading of counterfeits; the anonymity guaranteed by the Internet, the ability to easily trade in multiple countries and the possibility to order copies of official e-commerce outlets’ products online have made the Internet the most used supply channel for counterfeits. In addition, counterfeiters aggressively promote this method of distribution, primarily on social networks and particularly through Facebook. Online-ordered counterfeits are imported in small consignments by either postal mail or courier service. In 2015 a total of 2,693 consignments of counterfeits ordered online were seized by Customs – constituting 97.18% of all seizures for the year – of which 1,653 consignments (almost 60%) were attributed to a particular group which engages in the online trade of counterfeit Michael Kors handbags and sunglasses.
However, the most common counterfeit items are not only luxury goods, fashion, music and film products, but also an increasing variety of consumer goods, such as sports apparel, shoes, cosmetic and sanitary products, pharmaceuticals, watches and mobile phones (including accessories and technical equipment for electronic devices).
The new EU Customs Regulation (608/2013) and the corresponding implementing regulation (1352/2013), which replace the previous EU Customs Regulation (1383/2003) and the corresponding implementation regulation (1891/2004), came into force on January 1 2014. They standardise border seizure proceedings within the European Union and are thus applicable in Austria, where a special Austrian implementation law is now under consideration. Most likely, this will amend the Product Piracy Act, which contains provisions governing border seizures in Austria.
The IP rights that entitle rights holders to border seizure and other anti-counterfeiting measures are laid down in several national codes which provide for proper protection of intellectual and industrial property. Further, several EU regulations in this field apply directly. The main substantive IP laws in Austria are:
- the Trademark Protection Act;
- the EU Trademark Regulation (2015/2424);
- the Design Protection Act;
- the EU Design Regulation (6/2002);
- the Patent Code;
- the Utility Model Act; and
- the Copyright Act.
The Unfair Competition Act is also relevant with regard to internet service providers’ liability, as is the E-commerce Act. The Rules of Jurisdiction and the Code of Civil Procedure govern proceedings in civil matters.
The IP laws also contain criminal law provisions on the protection of intellectual property. In addition, certain provisions of the Criminal Code apply where wilful infringement has taken place.
The EU Customs Regulation, its implementing regulation and the Product Piracy Act govern border seizures in Austria. Pending the enactment of amendments to the Product Piracy Act, there is a legislative gap between the EU and Austrian regimes. In the meantime, the Austrian customs authorities have said that as of January 1 2014, they will apply the EU Customs Regulation and its implementing regulation directly.
The core elements of these proceedings are:
- a motion for official action to be filed with the customs authorities;
- seizure of counterfeit goods; and
- opposition proceedings.
Generally, rights holders must file a motion with Customs requesting it to inspect suspect goods to determine whether they are counterfeit and to seize them if they are. Thus, providing Customs with additional information on identifying features and distribution channels will help it to identify counterfeits. A border seizure order is valid for one year and can be repeatedly renewed for the same term. Customs will also act on the basis of an EU border seizure order.
Once goods have been identified as counterfeits traded on a commercial scale, or at least are suspected as such, Customs may seize them and temporarily suspend their release. Seizure may also be ordered by the tax authorities if the import of counterfeits amounts to tax fraud.
In the event of a customs seizure, the rights holder and the consignee or declarant of the shipment will be notified. The rights holder may request the names and addresses of the consignor and consignee, as well as data regarding the origin and provenance of the goods. Further, the rights holder is entitled to:
- inspect the seized goods;
- take photographs; and
- receive samples.
If the declarant or holder of the goods and the rights holder both agree, the detained counterfeits may be destroyed promptly (at the expense of the rights holder). Otherwise, within 10 working days of notification (which can be extended for an additional 10 working days), the rights holder must initiate a legal action – either civil or criminal – to prevent the detained goods from being released. For perishable goods, any action must be filed within three working days.
The consignee or declarant of the shipment may object to the seizure within 10 working days of notification. Otherwise, or if the consignee or declarant consents, the goods will be destroyed by, or under the supervision of, Customs – provided also that the rights holder:
- confirms that the seized goods are counterfeit; and
- consents to their destruction.
The costs of destruction are borne by the rights holder, although it may later seek to recover them from the counterfeiter. With the rights holder’s consent, the goods can also be made available to charitable institutions.
If an objection has been raised and court proceedings are not timely initiated, Customs must lift the seizure and release the goods. Otherwise, the seizure will be maintained until a final court decision has been rendered.
In order to keep administrative efforts and costs low, the new EU Customs Regulation has introduced a special procedure for the destruction of goods in small consignments, which allows for early destruction of the contents of postal or courier shipments of less than two kilograms or not more than three units, even without the consent of the rights holder.
Finally, importing or exporting counterfeits may constitute a tax offence, with a penalty of up to €4,000 (€15,000 in the event of wilful commission), as well as forfeiture of the counterfeits.
The substantive IP laws provide that wilful IP infringement is a criminal offence. The Code of Criminal Procedure sets out the procedural rules for criminal prosecution of counterfeiting.
One advantage of criminal proceedings is the right to a search warrant, which may yield further evidence or reveal a larger scale of counterfeiting activities. If other counterfeit goods are found during the search, they may be seized immediately. However, criminal proceedings do not provide for (preliminary) injunctive relief – only for punishment of the counterfeiter and forfeiture and destruction of the counterfeits. In certain circumstances, publication of the verdict may also be obtained. In straightforward cases, the judge can award damages for the injury suffered by the rights holder. However, the judge will often refer the rights holder to civil law proceedings in this respect.
In Austria, the criminal offence of wilful infringement is viewed as a private prosecution; therefore, the rights holder itself is responsible for filing and pursuing criminal charges. The time limit for criminal charges is generally one year, or five years for recurring offences. The penalty under most IP laws for wilful infringement ranges from a fine of up to 360 daily rates to up to two years’ imprisonment in the case of recurring offences. One daily rate may vary from €4 to €5,000, depending on the infringer’s economic strength.
Pre-trial investigation proceedings are no longer available to private prosecutors. This means that the rights holder must review the case and evaluate the available evidence carefully before initiating criminal proceedings; it can no longer file motions for preliminary measures against the suspect to obtain further evidence without having the suspect officially charged with a misdemeanour or crime.
The private criminal action must correspond to the requirements of a public prosecutor’s charge. Further, the private prosecutor must explain why it is entitled to bring charges. The private prosecutor may also apply for a search and seizure warrant and other appropriate measures. However, such warrants require the court’s approval and must be based on legitimate grounds. Moreover, if the suspect cannot be convicted (eg, since its intent could not be proven beyond doubt), the rights holder may still seek independent criminal forfeiture and destruction of the counterfeits.
Criminal charges for IP rights infringement must be brought before the court in the place where the offence has been committed. However, the Vienna Criminal Court has exclusive jurisdiction in cases of wilful infringement of patents, utility models, trademarks, designs, EU trademarks or EU designs.
The outcome of the case will determine the issue of legal costs. If the defendant is convicted, it must also reimburse the private prosecutor’s legal costs. If the criminal charges against the defendant are dismissed or the criminal proceedings do not result in a conviction, the plaintiff will be ordered to pay the legal costs.
Both the defendant and the plaintiff may appeal the verdict before the regional court of appeals.
A rights holder can also choose from an array of claims to bring in a civil court, including:
- injunctive relief;
- removal of the infringing goods and the tools necessary for their production;
- adequate compensation, irrespective of negligence; and
- publication of the injunction element of the judgment.
Further, in case of negligence, the rights holder can claim either damages (including lost profits) or delivery up of the assets realised by means of the infringement instead of adequate compensation. In case of wilful infringement or gross negligence, the rights holder may claim double remuneration (ie, twice the sum of adequate compensation), irrespective of proof of the damage suffered. In certain circumstances, the rights holder may also claim compensation for any immaterial damage inflicted.
In addition, the rights holder is entitled to:
- a rendering of accounts, in order to quantify the damage claimed; and
- detailed information on the origin, size or volume, prices and distribution channels of the counterfeit goods, including the personal data of any party which possessed or traded the counterfeits on a commercial scale.
Payment claims, such as claims for compensation, and injunction claims are subject to a limitation period of three years on notice of the infringement. For certain criminal misdemeanours, such as acts of wilful infringement, a longer limitation period of 30 years may apply.
Civil lawsuits for IP rights infringements are heard exclusively by the Vienna Commercial Court.
In addition, the Unfair Competition Act provides for similar claims against engaging in unfair, aggressive or misleading commercial conduct or practices, such as misrepresentation of ownership of IP rights or slavish imitation of products. The commercial courts or commercial divisions of the regional courts in the place where the offence has been committed or its result has occurred have jurisdiction over these disputes. However, in contrast to trademark claims, the limitation period for injunction claims in unfair competition cases is only six months.
The court’s judgment is subject to appeal to the respective court of appeals; there is a restricted right of second appeal to the Supreme Court, for which prior leave must be granted by an appeal court or the Supreme Court.
Most substantive IP laws provide for preliminary measures, as does the Enforcement Act. Since the implementation of the EU IP Rights Enforcement Directive (2004/48/EC) in 2006, rights holders can benefit from preliminary measures for other claims (eg, removal, adequate remuneration, damages and delivery up of the assets), in addition to preliminary injunctive relief. The preliminary measures are designed to secure both the claim and evidence until a final decision is handed down in full-scale proceedings. Such preliminary orders are subject to appeal and the additional remedy of an objection if the defendant was denied the chance to comment on the motion. Usually, the legal remedies in preliminary proceedings do not suspend enforcement of the preliminary injunction, but exceptions may be granted on a separate motion.
The E-commerce Act provides for ‘freedom of access’, meaning that no additional authorisation is required for a supplier to offer products online. In other words, the supplier need only observe the same requirements as when products are offered offline. However, the supplier’s website must contain detailed information about its name, address and email, as well as the prices of its products and shipment costs.
The Austrian IP laws stipulate that an offer of counterfeit goods (including bids via electronic media) constitutes an act of infringement. Moreover, the Unfair Competition Act categorises the online advertisement of pirated goods as an unfair trade practice in terms of an IP rights infringement.
The Supreme Court has further held that the launch of a website advertising counterfeits and offering them for sale infringes IP rights. This view applies even if the domain name is registered abroad, because a link with Austria is evident from the fact that the site can be accessed in Austria. However, the court also ruled that appropriate disclaimers on a website may exclude the possibility of bringing an action before the Austrian courts.
The relevant host provider may be made liable for IP rights infringement, unless:
- it was unaware of the content and the infringing conduct on the website; or
- it blocked the website immediately after becoming aware that the goods on offer were counterfeit.
Pursuant to the E-commerce Act, there is no general obligation for providers to monitor the content they host. For cease and desist claims, it is a prerequisite that the provider was made aware of the infringement by the third party. This is generally not the case, according to Supreme Court case law, unless the provider has been notified by the rights holder (eg, through a warning or cease and desist letter). After receiving such notification, the provider will be liable for the infringement, provided that it is obvious to a layperson. However, the provider may avoid liability if it blocks access to the infringing content immediately after receiving the notification or warning letter. Moreover, in the context of a website blocking injunction, the Supreme Court referred to the European Court of Justice (ECJ) for a preliminary ruling on the question of whether a party offering copyright and related rights-infringing material on a website is using the services of its end users’ access providers. The ECJ answered affirmatively, which means that the access provider shall be liable as an intermediary, even if it has no connection with the infringer.
Further, according to case law and amendments to the Telecommunications Act, which implemented the EU Data Retention Directive into Austrian law, the provider is not obliged to disclose information about the holder of a dynamic Internet Protocol address, as such data cannot be legally retained.
The most widely used preventive measure in Austria is the border seizure order. Precise, up-to-date information regarding the originals, detailed identification features and information on distribution channels enable Customs to identify counterfeits and facilitate seizures.
It is important to work closely with public authorities. Public agencies such as Customs can act not only in border seizure scenarios, but also in interstate commerce, in particular when tipped off about a consignment of counterfeits being shipped through Austria. Close cooperation with the police can also facilitate seizures based on official search warrants. Membership of or cooperation with national or international anti-counterfeiting agencies facilitates the exchange of valuable information and assists in the fight against counterfeiting syndicates.
Further preventive measures lie with the respective rights holder and often depend on the availability of sufficient funds. In particular, rights holders often run market studies and activities to enhance brand awareness. Large companies are increasingly choosing to monitor their supply chains, controlling their relationships with contractors and revising contracts and licence agreements accordingly. The use of electronic devices is also being considered by numerous businesses, but many do not pursue this course of action due to budgetary constraints. However, technology is increasingly being used, particularly by larger organisations, to authenticate goods and monitor procedures.
Private investigators may also be considered and often prove useful in locating known but evasive counterfeiters, or in discovering and recording counterfeiting or infringing conduct. Test purchases and copies of website print-outs may also be arranged by private investigators or a local attorney. The services of local legal counsel with special expertise in anti-counterfeiting should be retained, at least from the point at which the rights holder obtains (sufficient) proof of counterfeiting activity in Austria.
This article first appeared in World Trademark Review. For further information please visit www.worldtrademarkreview.com.
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Alexander Cizek studied law in Vienna and the United States, and was admitted to the New York Bar in 1996 and the Austrian Bar in 2000. After 14 years’ affiliation with a large international business law firm, where he headed the firm’s IP and technology practice group in the Vienna office, he founded IP/IT boutique CIZEK | IP. Mr Cizek specialises in all aspects of IP law, including trademarks, brand protection, anti-counterfeiting and trademark enforcement. He has extensive experience in anti-counterfeiting actions, including customs actions, and provides legal advice to both national and international clients.
Mr Cizek has been distinguished by the Chambers & Partners and Legal 500 guides for his brand protection and anti-counterfeiting work.