Change in HMRC procedures puts burden on brand and right holders to begin action against potential counterfeiting parties and confirm infringing nature of goods before goods are seized.

HM Revenue and Customs has made some amendments to its procedures relating to allegedly counterfeit goods which may have serious implications for right holders. These changes have been implemented with immediate effect in order to fully comply with Article 13 of Council Regulation (EC) No. 1383/2003 (Customs Regulation).

Until recently, HMRC would notify brand owners of potentially counterfeited goods and allow them 10 days to examine the goods. If the brand owner confirmed by means of a witness statement that the goods were counterfeit, HMRC would destroy the goods unless the importer objected. If an importer raised an objection, HMRC would launch condemnation proceedings at a local magistrates’ court to determined whether the goods were counterfeit. This procedure was not fully compliant with the provisions of the Customs Regulation.

HMRC will now no longer seize goods based on a witness statement alone, but will detain them pending the outcome of court proceedings instituted by the right holder. HMRC will only seize the goods if directed to do so by the appropriate court.

Accordingly, the burden of proof has shifted to the right holder who must confirm the infringing nature of the goods by taking legal proceedings. Ordinarily, such proceedings must be instituted within 10 working days, but no later than 20 working days, after notification of their detention by HMRC. Goods will only be seized if the right holder obtains a successful judgment and HMRC is directed by the court to seize the goods.

The regime will be administered as follows:

  • When HMRC detects goods believed to be infringing intellectual property rights, they will contact the right holder or its nominated representative as set out in the relevant intellectual property application and detain the goods for 10 working days
  • To maintain the detention beyond 10 working days, the right holder must initiate proceedings to determine whether an intellectual property right has been infringed. Alternatively, the right holder must reach an agreement with the declarant, holder or owner of the goods to abandon the goods
  • The period may, upon request, be extended by a maximum of a further 10 working days. Right holders must keep case officers informed of any delay. The detention period cannot exceed 20 working days in the absence of court action
  • In the case of perishable goods, the detention period set aside within which court proceedings must be initiated shall not exceed three working days and cannot be extended
  • Where the right holder obtains permission of the declarant, holder or owner to abandon its goods, the agreement should be in writing and must be communicated to the case officer by either party
  • Destruction of any goods will be carried out at the expense and under the responsibility of the right holder. Right holders should therefore ensure that they obtain prior permission from the person with authority to abandon the goods to the Crown

Until new legislation setting out HMRC’s powers relating to seizure in intellectual property cases is introduced, right holders must as part of their proceedings arrange for the disposal of any infringing goods via a court order.

Any actions that were started under the old procedure will continue to be processed under the old procedure and if appropriate, goods will be seized. However, right holders who seek an extension of a further 10 working days will be asked to initiate court proceedings during this time. In the absence of a court order, goods will not be seized for any intellectual property breach after 3 July 2009.

Comment

The changes signify an important shift in HMRC’s procedures, are likely to increase the workload of courts, and place a drain on the finances of right holders wishing to protect their brands. It is hoped that draft legislation setting out the powers of HMRC in relation to seizure in intellectual property cases will be placed before the UK parliament in August 2009 and that the legislation will come into effect by the end of the year.