Legal framework

The Dutch legal framework is a mixture of criminal law and civil law, and comprises:

  • EU legislation;
  • national substantive legislation; and
  • national procedural legislation.

In case of conflict between national and supranational law, the latter always prevails.

Relevant EU legislation includes:

  • the EU Customs Regulation (608/2013); and
  • the EU Customs Implementation Regulation (1352/2013).

No reference is made to EU directives as they have mainly been implemented into national law, including:

  • the Benelux Convention on Intellectual Property (trademarks and designs);
  • the Patent Act 1995;
  • the Copyright Act; and
  • the Criminal Code.

The relevant procedural statute is the Act on Civil Procedures. The new IP Regulation also covers geographical indications, plant varieties, topographies and semiconductors, utility models and trade names.

Border measures

Dutch Customs falls under the supervision of the Ministry of Finance. Customs imposes and collects taxes, and enforces EU and national customs legislation, including the EU Customs Regulation. The regulation applies as of January 1 2014.

‘Counterfeit’ and ‘pirated’ goods are defined in Article 2(5) of the regulation:

  • ‘Counterfeit goods’ are goods that are the subject of an act infringing a trademark in the member state where they are found and which bear, without authorisation, a sign which is identical to the validly registered trademark in respect of the same type of goods, or which cannot be distinguished in its essential aspects from such a trademark.
  • ‘Pirated goods’ are goods which are the subject of an act infringing a copyright, related right or design in the member state where the goods are found and which are or contain copies of a copyright, related right or design that are unauthorised by the rights holder or the rights holder’s representative in the country of production.
  • ‘Goods suspected of infringing an IP right’ are goods for which there are reasonable indications that they are infringe an IP right in the member state where they are found.

Anti-counterfeiting

Customs takes anti-counterfeiting actions seriously, as the marketing of counterfeit and pirated goods (and indeed all IP infringing goods) does considerable damage to law-abiding manufacturers, traders and rights holders. It also deceives consumers and endangers their health and safety. In addition, the government loses out on tax revenue, as many sellers of counterfeit goods try to transport them across borders at low values to escape payment of duties.

Customs may take action against counterfeiting either ex officio or upon an application by the rights holder.

Ex officio actions

If suspect goods arrive at Customs and no request for action against them has been lodged, Customs may nevertheless suspend ex officio the release of the suspect goods or detain them for up to four working days. This four-day period commences on the day that the rights holder is notified of the existence of the suspect goods.

The four-day period gives the rights holder time to submit an application for action against counterfeit goods (as set out in Article 5 of the EU Customs Regulation).

If the rights holder does not file an application for action, Customs shall release the goods for circulation. The goods may then either enter the local market or be forwarded to their ultimate destination, as the case may be.

Application for action

Under the EU Customs Regulation, a rights holder may apply for action by customs authorities in any EU member state against suspected counterfeited or pirated goods. The application form is defined in and attached to the EU Customs Implementing Regulation.

Under the regulation, each member state shall designate the customs department that is competent to receive and process applications for action. In the Netherlands, applications are processed by Douane Noord, which is based in Groningen.

Subject to the application for action being rejected, rights holders must provide Customs (on filing the application for action) with information that will enable it to distinguish genuine goods from counterfeit and/or pirated goods. This information can relate to the original goods, such as their method of storage, packaging and/or transport, or to previously intercepted counterfeit goods. Customs is known to store carefully all intelligence provided and to make it available at all relevant entry points, such as Amsterdam’s Schiphol airport and Rotterdam port.

On the basis of the information contained in the application for action, Customs may suspend, release or detain goods that are suspected of being counterfeit. On suspending the release of goods, Customs will notify the rights holder, which then has 10 working days (renewable once) to inspect the goods. Customs will provide the rights holder with information about the goods, including the quantity; it also usually provides digital photographs and samples.

On confirmation that the goods are counterfeit and that the rights holder will take action, Customs will provide all available details of the consignor, consignee and the declarant to the rights holder. On request, Customs will extend the timeframe by a maximum of another 10 working days (three days in the case of perishable goods).

During this period the rights holder may approach the infringer requesting it to:

  • forfeit the goods;
  • remove them from circulation; and
  • have them destroyed.

If the infringer objects to the destruction of the goods, the rights holder must initiate legal (civil) proceedings to resolve the issue. If the rights holder fails to commence proceedings or fails to inform Customs of these proceedings, then Customs will release the goods.

Simplified procedure

Customs can employ the simplified procedure set out in Article 23 of the EU Customs Regulation. This enables customs authorities to order the destruction of suspect goods without any need for a court to determine whether an IP right has been infringed under national law.

Where the declarant or holder of the goods has agreed to or not opposed the destruction of the goods within the deadline, Customs may deem the declarant or holder to have confirmed its agreement to the destruction. Emphasis is placed on the word “opposed”, which implies that the declarant, holder or owner of the goods has failed to express specifically that it objects to the destruction.

Small consignments procedure

Under the new regulation, a special regime exists for counterfeit or pirated non-perishable goods that are covered by a decision granting an application for action. The rights holder may request the application of the small consignments procedure. In that situation Customs shall notify the declarant or holder of the goods of the suspension of the release of the goods or their detention within one working day of the suspension or detention. The notification of the suspension or detention shall state that Customs intends to destroy the goods. The goods may be destroyed where, within 10 working days of notification of the suspension or detention of the goods, the declarant or holder has confirmed to Customs its agreement to the destruction.

Where the declarant or holder of the goods has not agreed to or opposed the destruction within a certain period, Customs may deem the declarant or holder to have confirmed its agreement to the destruction.

In certain cases, Dutch Customs does not follow the procedures of the regulation and instead applies criminal law. Customs shall always apply criminal law when suspect goods are discovered in travellers’ luggage (in cases of four or more items) or in the event of postal or courier parcels containing up to 25 items.

Criminal prosecution

The Criminal Code distinguishes between minor offences and crimes. The wilful manufacture and/or sale of counterfeit or pirated goods is a crime which carries a fine or a prison sentence of up to four years (Article 337).

The authority with investigative powers in the area of counterfeiting is the Fiscal Information and Investigation Service and Economic Investigation Service. Upon suspension of the release of goods, Customs will inform the service of this.

The service, together with the public prosecutor, will decide on the further prosecution of the manufacturer of the counterfeit goods. The public prosecutor has discretion as to whether to prosecute. In practice, prosecutors do not pursue many cases, as most are of the opinion that the matter is of a civil nature and ought to be resolved between the parties, either in a settlement or in civil legal proceedings.

However, the public prosecutor will take action against counterfeiting if it involves:

  • criminal organisations;
  • major tax and excise fraud (eg, cigarettes); or
  • a threat to public health and safety.

Remedies in criminal proceedings may consist of:

  • fines;
  • imprisonment;
  • confiscation and destruction of goods; and
  • payment of illegally obtained profits.

The judge in criminal procedures may also decide to impose an alternative punishment, such as community service. The main penalties for counterfeiting tend to be fines and confiscation and destruction of goods.

Civil enforcement

Under civil enforcement, a rights holder can take preliminary measures, such as detaining the goods, and file legal proceedings. The main types of civil proceedings are:

  • preliminary injunction proceedings; and
  • proceedings on the merits (full trial proceedings).

This is possible if the Dutch courts have jurisdiction. In accordance with recent EU case law, if goods are placed in external transit or customs warehousing in the EU customs territory, they can be classified as ‘counterfeit’ or ‘pirated’ goods only if it is proven that they are intended for sale in the European Union. If such proof is not delivered, the courts have no jurisdiction. The European Commission has developed guidelines to provide clarification on the application of the EU Customs Regulation with regard to goods – in particular, medicines – in transit through the EU territory. The guidelines address the specific concerns raised by India and Brazil on medicines in genuine transit through the European Union which are covered by a patent right in the European Union.

Detention of goods

If an infringer objects to the destruction of goods, the rights holder may seek permission from the district court to detain them. The goods will be detained at the premises of the party holding them at that point in time (ie, either Customs or a logistics service provider holding the goods under Customs’ supervision), at the rights holder’s expense.

If it is likely that the goods are counterfeit, the court will allow their detention on condition that proceedings are initiated within a term determined by the court. This term will be at least eight days and may be longer, provided that a reasonable explanation is given. A reasonable explanation could include an indication that the matter can be settled within a timeframe set by the court.

A rights holder’s first action should be to file a request to detain the goods, rather than launching straight into proceedings. This is because the period allowed under the detention rules provides more time (in addition to the initial term of 20 working days under the EU Customs Regulation) to negotiate a settlement with the infringer.

If the matter is not settled during this time, the rights holder must initiate proceedings before the expiry of the deadline set by the court.

Since the implementation of the EU IP Rights Enforcement Directive (2004/48/EC), rights holders may also seek ex parte injunctions requesting the court to order the transfer of the infringing goods to the rights holder. An ex parte injunction will become invalid unless the rights holder commences inter partes proceedings within the timeframe set by the court.

Proceedings

Of the two types of action available, preliminary injunction proceedings are most commonly used in counterfeiting cases, as they enable rights holders to stop infringements more quickly. Preliminary proceedings will lead to a provisional measure that can become final, either because the parties achieve a settlement or because the initial action is followed by proceedings on the merits leading to a definitive measure.

Preliminary proceedings are useful for taking action against blatant infringements that require an urgent solution. In customs matters it is recommended to opt for proceedings on the merits. There is no urgency, since the goods are detained anyway and it is best to strive for a definitive measure.

Preliminary injunction proceedings at first instance usually take between two and eight weeks. Proceedings on the merits may take between six and 18 months at first instance. The duration of the proceedings on the merits depends to some extent on the procedural behaviour of the defending party and the court. Unlike in preliminary proceedings, the court in full trial proceedings may render declaratory judgments.

For the duration of the proceedings, Customs will continue to suspend the release of the infringing goods. If a rights holder loses at first instance, Customs will suspend release where an appeal is filed.

In counterfeiting proceedings, the matter is likely to conclude following a judgment at first instance. Under Dutch civil procedural law, the losing party will be ordered to compensate the other party’s legal costs. Unless the parties request otherwise, the courts normally follow the Court Directive on Compensation of Legal Costs in IP Proceedings (Article 1019h Rv).

Remedies

In civil proceedings, the rights holder may seek:

  • a declaratory judgment that the goods infringe its IP rights;
  • surrender of the infringing goods;
  • destruction of the infringing goods;
  • destruction of the materials and tools with which the infringing goods were manufactured in the Netherlands;
  • compensation for damages;
  • lost profits; and
  • compensation for legal costs (including out-of-court work).

Compensation for legal costs under the application of the Court Directive on Compensation of Legal Costs in IP Proceedings may range from €6,000 to €25,000.

Anti-counterfeiting online

The online sale of counterfeit goods is part of a wider trend of infringements taking place on the Internet, including unauthorised parallel trade and domain name grabbing.

Counterfeits are sold mainly on so-called ‘replica’ sites (eg, www.replicawatches.com) and on auction sites, such as Ali Baba.

Auction sites generally have effective notice and takedown procedures in place (eg, eBay’s Verified Rights Owner programme). Rights holders can easily report listings that infringe their rights. eBay has reportedly declared that it is in its interest to ensure that infringing items are removed from its site and it is known to take such action.

Removal normally takes place within a few hours.

If and when online infringements are pursued through the courts, it is important to establish that the courts have jurisdiction. Accordingly, rights holders should ensure that sales are directed at customers in the Netherlands. Dutch courts will consider factors such as the site’s ability to accept payment in euros into a Dutch bank account or with Dutch methods of payment as a sign that sales are directed at Dutch customers. Advertising in Dutch may also lead Dutch courts to claim authority over the matter.

Finally, the host of a website that contains information provided by third parties may be found liable for infringement under Article 6:196c BW of the Civil Code if it does not remove infringing material after being notified of its illegality. Finally, a rights holder may request access providers to block access to websites that engage in the sale of counterfeit goods.

Internet security and online investigation strategies

The unlimited potential of the Internet also causes problems in monitoring infringements online. Businesses would be ill advised to try to monitor the Web themselves. Instead, they should hire investigators and/or IT consultants that specialise in monitoring the Internet for IP infringements.

Where infringements take place on auction sites, rights holders may follow the notice and takedown procedures described above.

Preventive measure/strategies

Counterfeiting is unlikely to disappear overnight. It is therefore important that rights holders set up and implement proactive anti-counterfeiting strategies.

One key measure is to apply for customs action under the EU Customs Regulation.

A proper anti-counterfeiting operation requires support on the ground (in key jurisdictions) in the form of investigators and counsel. It is important that the latter maintain good contacts with customs authorities (both the central customs organisation and the customs officers at the entry points).

Finally, rights holders may use technical devices or other measures on their products so that all stakeholders can easily distinguish counterfeits from genuine products.

Huib Berendschot

Peter Claassen

This article first appeared in World Trademark Review. For further information please visit www.worldtrademarkreview.com.