ADVOCATE GENERAL, OPINION OF 3 FEBRUARY 2011, COMBINED CASES C-446/09 AND C-495/09, KONINKLIJKE PHILIPS ELECTRONICS NV V. LUCHENG MEIJING INDUSTRIAL COMPANY LTD AND OTHERS (PHILIPS) / NOKIA CORPORATION V. HER MAJESTY'S COMMISSIONERS OF REVENUE AND CUSTOMS (NOKIA)

In the "Philips" case, Advocate General Cruz Villalón recommended the so-called "production fiction" could not be applied to goods in transit, i.e., such goods could not be treated as if they were produced in the territory of the European Union. In the "Nokia" case, the Advocate General suggested that customs can seize goods in transit if there are "sufficient grounds for suspecting" that they are counterfeit goods and, in particular, that they are to be put on the market in the European Union.

Both Nokia and Philips have to deal with counterfeit goods in external transit through the European Union from one non-EU Member State to another. In previous cases, the Court of Justice of the European Union (CJEU) had held that the mere transit of goods through the European Union does not constitute a trademark infringement — unless there was evidence that these goods would be put on the EU market.1 This was generally interpreted as preventing customs authorities from seizing and destroying counterfeit goods in transit.

However, the issue of counterfeit goods in transit and the interpretation of the Customs Regulation2 were newly raised in the two references to the CJEU for a preliminary ruling, in the "Philips" case by the Court of First Instance of Antwerp, and in the "Nokia" case by the Court of Appeal of England and Wales.

The "Philips" case concerned a shipment of shavers from Shanghai via Belgium to an unknown destination, which Philips claimed infringed its copyright and registered design rights. After the Belgian customs authorities detained the goods, Philips applied for a court ruling that its intellectual property rights were infringed.

In the "Nokia" case, a consignment of counterfeit mobile phones and their accessories bearing Nokia's trademarks was shipped from Hong Kong to Colombia via the United Kingdom. The English customs authorities refused to seize the counterfeit goods, in absence of evidence of a likely diversion onto the EU market — albeit the consignor and consignee could not be identified. This refusal was contested by Nokia before court.

In the "Philips" case, the Advocate General analyzed whether an infringement of intellectual property rights could be established on the basis of the so-called "production fiction" if counterfeited goods were seized in transit, i.e., if such goods could be treated as if they were produced in the country through which they were transported. In line with the previous case law of the CJEU, the Advocate General considered that the production fiction was not compatible with the old Customs Regulation and further EU law since this disregarded the requirement of "use in the course of trade" for establishing an infringement of intellectual property rights and, also, was contrary to the principle of territoriality.

In the "Nokia" case, the Advocate General considered that customs authorities might seize goods in transit if there were "sufficient grounds for suspecting" that these were counterfeit goods and, in particular, that they were to be put on the market in the European Union — either in conformity with a customs procedure or by means of an illicit diversion. The relevant criteria for custom authorities to lawfully seize goods in transit was thus "suspicion of infringement" — rather than a final determination of infringement — i.e., the customs must at the very least have "the beginnings of proof" that those goods may infringe intellectual property rights. The Advocate General suggested that circumstances which may give rise to such "suspicion" might be, for example, excessive duration of the transit, the kind and number of means of the transport, the greater or lesser difficulty of identifying the consignor or the lack of information on destination or consignee, which would indicate that the counterfeit goods were to be placed on the EU market.

The decision of the Court of Justice is expected in May or June 2011.