Recent amendments to the Trade Marks Act 2002 and the Copyright Act 1994 have enhanced the government's ability to investigate and prosecute those who import and trade in counterfeit goods.
Parliament added powerful new tools to fight pirated and counterfeit goods as part of the Copyright Amendment Act and the Trade Marks Amendment Act (the Amendments), the anti-counterfeiting provisions of which came into force on 7 October 2011. In addition to the anti-counterfeiting measures, the Amendments make several other changes to trade mark and copyright law, discussed separately in our accompanying article regarding New Zealand's adoption of the Madrid Protocol and our February 2009 summary of the Amendments.
The Amendments grant the New Zealand Customs Service (Customs) and the National Enforcement Unit (NEU) of the Ministry of Economic Development (MED) authority to investigate and prosecute criminal cases of trade mark and copyright infringement. The Trade Marks Act 2002 and the Copyright Act 1994 already make it a criminal offence to sell, import or manufacture counterfeit goods. These existing criminal provisions cover not only trading in finished counterfeit goods, but also extend to possessing or manufacturing items specifically intended to create counterfeits, such as moulds, dies, patterns or fake labels. Trade mark owners should note that only registered trade marks are protected by the criminal sanctions of the Trade Marks Act.
The potential penalties for criminal violations are severe, including fines of up to $150,000 and five years in prison. Although these harsh penalties have been available for many years, they have rarely been applied.
Prior to the Amendments, the Police bore sole responsibility for enforcing the criminal provisions of the Trade Marks Act and Copyright Act. Unfortunately, the Police lacked the resources to pursue intellectual property crimes. Many repeat violators exploited this fact, and the commercial realities faced by rights holders, to avoid effective remedies.
When intellectual property owners detect counterfeit goods, they understandably focus their attention on immediately removing those goods from the marketplace (or better yet, preventing the goods from entering the country). After counterfeits are taken out of circulation, rights holders frequently decide not to pursue civil proceedings against the infringers - defendants may be difficult to locate, will usually have time to conceal or destroy evidence, and may be "judgment-proof" even if large damages are awarded. As a result, the main risk assumed by many counterfeiters has until now been merely the forfeiture of whatever shipments Customs actually detected and the loss of any inventory intellectual property owners discovered in the marketplace, which usually represented only a small portion of the total.
New Criminal Authority for Customs and the NEU
The Amendments address these issues by giving Customs and the NEU statutory authority to bring criminal proceedings against counterfeiters. These new powers complement, but do not replace, the existing authority of the Police. Parliament determined that Customs and the NEU will often be in a better position than the Police to allocate the necessary resources and expertise to intellectual property offences. By expanding the criminal authority given to Customs and the NEU, Parliament intended to increase the number of investigations and prosecutions, particularly against repeat violators.
Customs has an existing role as literally the front line against counterfeit goods entering New Zealand, and many cases originate with Customs intercepting a shipment of pirated goods. The Amendments authorise Customs to fully pursue these cases, without referring the matter to the Police or requiring a private plaintiff to take on the responsibility of civil litigation.
The most effective action rights owners can take to prevent counterfeits remains the same - notifying Customs of their trade marks and copyright works. Border protection notices are a cost-effective means to enforce intellectual property rights, and provide Customs with the necessary information (and legal authority) to intercept hundreds of thousands of counterfeit items each year.
The Amendments give Custom Officers a new power - the right to seize goods suspected to be counterfeits, even if a border protection notice has not been submitted. This new power may prove useful when Customs officers identify goods that are obvious counterfeits, or where rights holders learn about specific shipments that require immediate action before a formal border protection notice can be submitted. However, intellectual property owners should not rely on Customs to know what marks and works require protection, or to recognise fakes, and should be proactive in providing information, submitting protection notices, and taking other actions to help Customs intercept infringing goods.
In addition to enhancing border protection measures, the Amendments extend post-border controls by granting new criminal enforcement powers to the NEU. The NEU already enforces the criminal provisions of other commercially-focused statutes, such as offences under the Companies Act 1993, the Securities Act 1978 and the Receivership Act 1993. As a result, the NEU is familiar with the process of following up complaints from private parties, sharing information with other government agencies, and investigating companies and individuals who choose to operate at the margins of lawful commercial activity. Moreover, the NEU has investigated criminal cases under the Major Events Management Act 2007, providing direct experience with intellectual property and counterfeiting issues.
Expanded Search, Seizure and Investigation Powers
To back up the new criminal authority of the NEU and Customs, Parliament has given both agencies the necessary tools to investigate suspected criminal activity.
These new powers include the ability to conduct warrantless searches and seizures, subject to several limitations. When goods come into the custody of Customs, a Customs officer may seize those goods without a warrant if the officer reasonably believes that they are evidence of, or relevant to investigating, criminal violations of the Trade Marks Act or Copyright Act. Similarly, MED enforcement officers will also have authority to seize goods without a warrant, if those goods are located in a public place such as a store.
Customs can also require any person to provide documents, and to appear and answer questions, regarding suspected counterfeits. Refusing to comply with a request for documents, or failing to appear for questioning or answer Customs' questions, would itself be a criminal offence. In addition, the Amendment provides enforcement officers from Customs, the MED or the NEU with broad authority to apply for search warrants to obtain other information or documents, or to seize goods in connection with a criminal investigation.
The Amendments represent a relatively modest expansion in the criminal and investigatory provisions of the Trade Marks Act and Copyright Act, but are likely to have an important practical impact. Once in place, the new powers granted by the Amendments should provide a more effective deterrent against potential counterfeiters, needed resources and administrative focus to effectively investigate violations, and more powerful remedies against companies and individuals who continue to trade in pirated goods.