Proposal for New EU Regulation Concerning Customs Enforcement Of Intellectual Property Rights

On May 30, 2011, the EU Council had published Document 10880/11 conveying a Proposal for a regulation of the European Parliament and of the Council concerning customs enforcement of intellectual property rights issued by the EU Commission under reference COM(2011) 285 final on May 26, 2011. The gist of this proposal was summarised within the Document as follows:

The review identified certain improvements to the legal framework that were considered necessary to strengthen the provisions concerning enforcement of intellectual property rights, whilst at the same time ensuring legal clarity of the provisions themselves. It is therefore proposed to replace Council Regulation (EC) No 1383/2003, with the attached draft new Regulation.

In order to strengthen enforcement, it is proposed to broaden the scope covered by Regulation (EC) No 1383/2003, by including trade names, topographies of semiconductor products and utility models. It is also proposed to widen the scope of the Regulation by including infringements resulting from parallel trade and devices to circumvent technological measures, as well as other infringements of rights already enforced by customs.

The Regulation would maintain the ability for customs to control for the purpose of enforcement of intellectual property rights, in all situations where the goods were under their supervision and the distinction between the procedural nature of the legislation and substantive law on intellectual property would be emphasised.

The Regulation would also introduce procedures enabling customs, under certain conditions, to have goods abandoned for destruction without having to undergo formal and costly legal proceedings. These would be differentiated according to the type of infringement. For counterfeit and pirated goods, the agreement of the owner to destroy the goods could be presumed if the destruction had not been explicitly opposed, whereas for other situations, the owner of the goods would have to agree explicitly to their destruction. In case no agreement is reached, the right-holder would have to initiate legal proceedings to establish the infringement, otherwise the goods would be released.

A specific procedure is also proposed for small consignments of suspected counterfeit and pirated goods covered by an application, which would allow for goods to be destroyed without the involvement of the right-holder.

Additional provisions are proposed to ensure the protection of the interests of legitimate traders from possible abuse of the customs enforcement procedures and to integrate the principles of the Charter of fundamental rights in the Regulation. To this end, the Regulation would clarify the timelines for detaining suspected goods, the conditions in which information about consignments would be passed on to right-holders by customs, the conditions for applying the procedure allowing for destruction of the goods under customs control for suspected infringements of intellectual property rights other than for counterfeiting and piracy, and the right of defence. In this way, the new regulation would become a more robust enforcement tool thereby enhancing the legitimacy of customs action.The issue of costs of storage and destruction of infringing goods has attracted attention from different stakeholders. The Regulation would continue to provide that storage and destruction costs directly incurred by customs be assumed by the right-holders requesting customs action, though this would not preclude them from taking legal action to recover such costs from the primary liable party. However, it is proposed to introduce an important exception for small consignments, for which storage and destruction costs would be assumed by customs.

Well, frankly, I think the above sentence saying The Regulation would also introduce procedures enabling customs, under certain conditions, to have goods abandoned for destruction without having to undergo formal and costly legal proceedings sounds quite frightening. The executive shall be empowered to destroy goods without formal proceedings? I hitherto thought that the Rule of Law ever requites Due Process, didn’t I?

On May 30, 2011, the Secretary-General of the European Commission has also published Document 10880/1 ADD 1 conveying a Commission Staff Working Paper – Impact Assessment accompanying the document Proposal for a regulation of the European Parliament and of the Council concerning customs enforcement of intellectual property rights justifying this approach. A summary thereof is available with Document 10880/11 ADD 2. Details of the results of a public consultation held in 2010 were published on June 06, 2011, with Document 10880/11 ADD 3.

On December 13, 2011, the Rapporteur of the Committee on the Internal Market and Consumer Protection of the European Parliament, Mr Jürgen Creutzmann (FDP), has published his Draft Report on the Proposal for a regulation of the European Parliament and of the Council concerning customs enforcement of intellectual property rights (COM(2011)0285 – C7-0139/2011 – 2011/0137(COD)). In particular, this paper suggests that a traveller exemption clause in the Commission Proposal should be deleted:

It is also appropriate not to apply the Regulation to goods carried by passengers in their personal luggage as long as these goods are for their own personal use and there are no indications that commercial traffic is involved.

Mr Creutzmann argues on behalf of the Committee that the proposed Regulation in question seeks merely to set out a procedural framework for the customs enforcement of IPRs. In his view it cannot be read as containing any substantive provision influencing the determination of IPR infringements. The exemption of travellers’ luggage is not consistent with this approach, since according to the EU’s substantive IP legislation, IPR can only be enforced when the goods are of commercial nature/used in the course of trade.

Moreover, in a similar way a suggestion is made to extend the scope of the proposed Regulation to parallel imports and so-called “overruns” (goods that have been manufactured without the consent of the holder of intellectual property rights), amongst other types of infringements. According to Mr Creutzmann, for reasons of legal clarity and in order to ensure correct implementation it is appropriate to use the wording of Article 3 of Regulation (EC) No 1383/2003 to describe these infringements.

Both suggestions of Mr Creutzmann apparently are highly controversial.

Recently, the General Secretariat of the EU Council wrote down some notes concerning the above-identified Proposal for a regulation of the European Parliament and of the Council concerning customs enforcement of intellectual property rights, issuing Document 5145/12 originally classified as LIMITE. However, I was able to obtain this paper under a request based on Regulation (EC) No 1049/2001. With this paper, the Danish EU Presidency informs the Delegates of the Working party on Customs Union that they intend to hold discussions on the basis of the thematic topics as listed below:

1. Role of customs and responsibilities of the rights-holder
2. Transit
3. Traveller’s derogation
4. Parallel trade
5. Any other right that is established as an exclusive intellectual property right by EU legislation
6. Right to be heard
7. Delegated and implementing acts
8. Suspicion of infringement – adequate evidence
9. Special procedure for counterfeit and piracy goods
10. Special procedure for small consignments
11. Failure of the right holder to meet his obligations
12. Sampling
13. Permitted use of information
14. Perishable goods
15. Notifications – Dispatch/receipt
16. Costs
17. Anticipated release
18. COPIS – Data Protection

The paper also comprises notes concerning points 1 and 2, namely Role of customs and responsibilities of the right-holders and Transit, respectively:

1. Role of customs

[...]

The main question to confirm is : Are the customs authorities just third independent persons that simply identify possible civil conflicts between private parties, or are the customs authorities public authorities who play an active role in countering IPR infringements, which undermine the EU economy, and – in doing so – take into account the need to safeguard legitimate interests and rights of the concerned persons?

To answer this question, it is necessary to take account of the fact that IPR are private rights conferred upon the underlying public policy objectives of protecting intellectual property, as laid down in EU and national laws, so as to promote technological development (see TRIPS preamble). Intellectual property rights are enshrined in article 17(2) of the Charter of Fundamental Rights of the EU and are a strategic objective of the EU 2020 Strategy and of the Single Market Act. Implementing IPR is one of the tasks of customs authorities, which make decisions based on their own assessment and interpretation of the law and the facts.

The Working Party is, therefore, invited to confirm the view that customs authorities in the EU must take an active role in countering IPR infringements and safeguard the legitimate interests and rights of the concerned persons.

Well, to me it seems that one of the crucial questions in this context might be as to whether or not Customs Officials indeed are qualified to take an active role in countering IPR infringements and safeguard the legitimate interests and rights of the concerned persons if it comes to more complex and entangled situations, especially when patent rights are involved.

The other note goes as follows:

2. Transit

The treatment by customs of goods in transit under Regulation No. 1383/2003 has attracted a lot of attention among EU institutions and stakeholders as a result of the WTO dispute with India and Brazil on the transit of the so-called generic medicines through the EU, and of the ECJ Nokia/Philips ruling of 1st December 2011 (Joined Cases C-446/09 and C-495/09). The Joint Understanding with India on the treatment of generic medicines crossing the EU (on medicines and patents), and the ECJ ruling (on any goods and IPRs) both confirm the principle that the placing of goods originating from and destined to a third country under a suspensive regime such as transit in the EU, cannot amount to an IPR infringement in the EU, unless these goods are diverted onto the EU market.

The Commission indicated at the last CUG meeting that its proposal for a new regulation on the customs enforcement of IPR reflects the Joint Understanding with India as well as the ECJ ruling. First, the proposed regulation is of procedural nature and can therefore not create new rights beyond those contained in the EU and Member States national laws on the protection of IPR. This also means that the proposed regulation would apply to goods under customs supervision, upon which customs can make any control they deem appropriate, but that the suspicion of infringement of an IPR can only be assessed on the basis of these EU and Member States national laws on a case-by-case basis. This is clearly acknowledged in the draft report from the European Parliament IMCO Committee. Second, recital 17 stipulates that, with regard to medicines in transit through the EU in the meaning of Article V GATT, customs authorities should, when assessing a risk of infringement of IPRs, take account of any substantial likelihood of diversion of these goods onto the market of the Union.

It has been suggested in the EP that the new regulation should contain some extracts of the ECJ ruling stipulating what should be considered as an IPR infringement in case of goods placed under a suspensive regime (i.e. diversion onto the EU market), and the indications on which customs should base their suspicion of diversion of goods onto the EU market. This would however restrict the applicability of the regulation to what is considered as an infringement under the existing EU and Member States national laws on the protection of IPR. On the other hand, given that the list of criteria provided by the Court is not exhaustive and cannot be applied automatically, it would also limit the power of customs in assessing all the facts of a case.

See also my earlier Blog post India And EU Reach Understanding On Seizure of Indian Generic Drugs in Transit here. The above-mentioned ECJ Nokia/Philips ruling of December 01, 2011, (Joined Cases C-446/09 and C-495/09) is available there. The result of that case was as follows:

Council Regulation (EC) No 3295/94 of 22 December 1994 laying down measures concerning the entry into the Community and the export and re‑export from the Community of goods infringing certain intellectual property rights, as amended by Council Regulation (EC) No 241/1999 of 25 January 1999, and Council Regulation (EC) No 1383/2003 of 22 July 2003 concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights must be interpreted as meaning that:

– goods coming from a non-member State which are imitations of goods protected in the European Union by a trade mark right or copies of goods protected in the European Union by copyright, a related right or a design cannot be classified as ‘counterfeit goods’ or ‘pirated goods’ within the meaning of those regulations merely on the basis of the fact that they are brought into the customs territory of the European Union under a suspensive procedure;

– those goods may, on the other hand, infringe the right in question and therefore be classified as ‘counterfeit goods’ or ‘pirated goods’ where it is proven that they are intended to be put on sale in the European Union, such proof being provided, inter alia, where it turns that the goods have been sold to a customer in the European Union or offered for sale or advertised to consumers in the European Union, or where it is apparent from documents or correspondence concerning the goods that their diversion to European Union consumers is envisaged;

– in order that the authority competent to take a substantive decision may profitably examine whether such proof and the other elements constituting an infringement of the intellectual property right relied upon exist, the customs authority to which an application for action is made must, as soon as there are indications before it giving grounds for suspecting that such an infringement exists, suspend the release of or detain those goods; and

– those indications may include, inter alia, the fact that the destination of the goods is not declared whereas the suspensive procedure requested requires such a declaration, the lack of precise or reliable information as to the identity or address of the manufacturer or consignor of the goods, a lack of cooperation with the customs authorities or the discovery of documents or correspondence concerning the goods in question suggesting that there is liable to be a diversion of those goods to European Union consumers.

Finally, with the above-cited Document 5145/12, the Working party on Customs Union is invited to indicate whether, as regards transit and other suspensive regimes, 1) it supports the Commission’s proposal insofar as it reflects the joint understanding with India and the ECJ Nokia/Philips ruling, and, 2) the future regulation should reflect more explicitly the ECJ Nokia/Philips ruling (and/or the joint understanding).

It is not known to me why Document 5145/12 originally was classified LIMITE. There are at least two more similar papers, namely Document 5436/12 as well as Document 5628/12. I have filed requests for obtaining a copy thereof. Stay tuned.

(Photo: (C) 2010 by Roger Price aka antwerpenR via Flickr and licensed under the terms of a CC license)