In the realm of international trade in goods and commodities, the term ‘goods in transit’ refers to goods which originate in one country and are shipped to another country, but are destined for a third country.[1]

The problem of counterfeit (fake) goods in transit through the European Union has, for some time, been the subject of proposals to change the law in the EU.  As long ago as 2005, the EU Commission published a ‘Communication’ which stressed that “transhipment of counterfeit goods is of growing concern because fraudsters break routes to disguise the origin of the goods” and “ the [EU] itself was used to disguise the origin of goods (e.g., fake medicines from Asia transhipped through the EU en route Africa).”

The law to deal with this problem has been inadequate.  In 2009, the English High Court, in the case of Nokia Corporation v Her Majesty's Commissioners of Revenue & Customs, the judge, Mr Justice Kitchin (as he then was), refused (upon the proper interpretation of the old Customs Regulation No.1383/2003) Nokia's application for judicial review of (i) a decision by UK Customs authorities not to continue to detain a consignment of allegedly counterfeit goods and (ii) the policy of UK Customs to regard goods which move through the European Union to another country as not being capable of being counterfeit goods when they do not enter into free circulation in the EU.

The judge concluded his judgment by saying, at paragraph 80:        ‘I recognise that this result is not satisfactory. I can only hope it provokes a review of the adequacy of the measures available to combat the international trade in fake goods by preventing their transhipment through Member States.’

The judge’s decision was upheld by the European Court on 1 December 2011 in Joined Cases C-446/09 and C-495/09.

Now, after a little over two years of the EU legislative process, the Legal Affairs Committee of the EU adopted on 16 June 2015 the text of a proposed new EU Regulation on the (to be renamed) EU Trade Mark, which includes a provision which strengthens the fight against counterfeit goods in transit through the territory of the EU.   

When the new law comes into force, owners of EU trade marks will be able to enforce their rights to prevent counterfeit goods from transiting through the European Union.

Article 9(5) of the proposed Regulation provides that owners of an EU trade mark shall be entitled to prevent third parties from bringing counterfeit goods, in the course of trade, from third countries into the European Union without being released for free circulation there, subject to a proviso that the entitlement to have the goods detained would lapse if the declarant or the holder of the goods is able to prove that the EU trade mark owner is not entitled to prohibit the sale of the goods in the country of final destination.

A number of recitals to the Regulation help to appreciate the meaning and effect of Article 9(5).

The first explains that trade mark owners are given this remedy with the aim of strengthening trade mark protection and combating counterfeiting more effectively and in line with international obligations of the EU under the World Trade Organisation (WTO) framework, in particular Article V of the General Agreement on Tariffs & Trade (GATT) on freedom of transit and, as regards generic medicines, the ‘Declaration on the TRIPS Agreement and Public Health’ adopted by the Doha WTO Ministerial Conference on 14 November 2001. 

The second recital states that, to this effect, ‘it should be permitted to prevent the entry of infringing goods and their placement in all customs situations, including transit, transshipment, warehousing, free zones, temporary storage, inward processing or temporary admission, also when these goods are not intended to be placed on the market of the European Union. In performing the controls, the customs authorities should make use of the powers and procedures laid down in the Regulation (EU) No 608/2013 concerning customs enforcement of intellectual property rights, also at the request of the right holders. In particular, the customs authorities should carry out the relevant controls on the basis of risk analysis criteria.’

The third recital explains the reason for the proviso in the second paragraph of Article 9(5), which is to reconcile the need to ensure the effective enforcement of trade mark rights with the necessity to avoid hampering the free flow of trade in legitimate goods. 

The fourth recital is a reminder that Article 28 of the Customs Regulation (EU) No 608/2013 provides that a right holder is to be liable in damages towards the holder of the goods where, inter alia, the goods in question are subsequently found not to infringe an intellectual property right.

The last recital is an important reference to the desire that ‘appropriate measures should be taken with a view to ensuring the smooth transit of generic medicines. With respect to international non-proprietary names (INN) as globally recognized generic names for active substances in pharmaceutical preparations, it is vital to take due account of the existing limitations on the effect of European Union trade mark rights. Consequently, the proprietor of a European Union trade mark should not have the right to prevent any third party from bringing goods into the Union without being released for free circulation there based upon similarities between the INN for the active ingredient in the medicines and the trade mark.’

The new legislation is likely be put to the final vote by the European Parliament in October or November 2015 and, if passed, would come into force within 90 days of publication in the Official Journal, i.e. by January or February 2016.