By Richard Taylor, DLA Piper, Sheffield


Trade marks and border controls - part two

Part one of this article looked at the extent to which intellectual property (IPR) owners can use their rights to divide world markets - the 'grey market' for goods in the European Economic Area (EEA) - and use trade marks to stop unauthorised importation into the EEA (see [2007] Gazette, 6 September, 24). This article considers how IPR owners can use Customs & Excise (C&E) controls in the UK to stop the importation of infringing goods, and the powerful European rules highlighted by SanDisk Corporation v Koninklijke Philips Electronics and ors [2007] EWHC 332 (Ch).



Section 89 of the Trade Marks Act 1994 allows proprietors and licensees of registered trade marks to notify the commissioners of C&E that infringing goods are expected to arrive in the UK at a time and place specified in the notice, and that those goods should be treated as prohibited. Section 111 of the Copyright, Designs and Patents (CDP) Act 1988 has a similar provision for copyright holders, allowing them to notify C&E, in writing, that infringing copies of their work should be treated as prohibited goods.



However, an application cannot be made under these Acts if it relates to goods for which an application can be made under EC law (section 89(3) of the Trade Marks Act and section 111(3B) of the CDP Act). The key regulation is Council Regulation (EC) No1383/2003. The regulation enables rights holders to obtain border detention orders (BDOs) by application to their local customs authority.



The interface between the Community and UK regimes is tricky. Generally, the UK regime applies to goods under UK or Community-registered trade marks which are expected to arrive in the UK from outside the EEA, or from within the EEA but which have not been in free circulation here. The European regime applies to patents, designations of origin or geographical indications or counterfeit UK and Community trade marks, and comes into operation when such goods are entered for free circulation, export or re-export, or are found in the course of checks on goods under customs supervision. If in doubt, check with C&E.



If the regulation applies, then under article 5(4) the rights holder may ask that action be taken by the customs authorities of one or more other relevant member states, as well as their national customs authority. This means that the holders of a Community-wide right need only lodge one application in the UK, for action by all EU customs authorities. This can be particularly useful if the point of entry of the potentially infringing product is unknown, or if the entry location changes. Under article 9 of the regulation, once a customs authority is satisfied that particular goods are suspected of infringing an intellectual property right, it can detain or suspend the release of those goods.



The relevant customs authority does not assess for itself whether the products are actually infringing goods. Border control laws contain no provision or mechanism for entertaining rival contentions of infringement or non-infringement at the stage of applying and obtaining a BDO. This is a matter for the court.



A safeguard against rights-holders abusing the regime is that, under article 6, they must make a 'declaration' to the customs authority (or authorities) and to third parties, that they will pay all costs and liabilities incurred for any wrongful detention, or when items are not proven to be infringing, or by default (for example, if proceedings are not initiated by the rights-holder within ten days of notice of the relevant detention).



Can the system nevertheless be abused? This was the allegation in SanDisk. Koninklijke Philips and others owned a number of patents relating to MP3 technology. Those patents had been the subject of an intensive campaign of licensing through Europe by their Italian licensee, Sisvel. SanDisk is a US company which imports and sells MP3 players in the EC. It had refused the offer of a licence of Koninklijke Philips' patents and instead challenged their validity. Sisvel alleged infringement of the patents and obtained BDOs in Italy and Germany. SanDisk claimed that Sisvel's licensing policy, and obtaining these BDOs, was harassment amounting to abuse of a dominant position, and sought interim relief.



The court ruled that it had no jurisdiction to hear allegations of abuse in Italy and Germany, although it also found against the allegations of abuse on the facts. The effect of the BDOs in Italy and Germany was that the goods were detained at the border of those countries, and Sisvel had the opportunity to commence proceedings for infringement within ten days to prevent the goods being released and entering free circulation in Europe - a step it had taken in both countries.



Although the judgment is not of itself particularly illuminating, the facts behind it show just what a powerful weapon border-controls can be. So long as a rights-holder is prepared to assert its right, and so long as it is prepared to take the risk of a claim in damages if its right is found invalid or not infringed, it can close down on a pipeline of goods which it alleges infringe those rights.



A few practical points for practitioners looking to make use of these rights:

l Practitioners should warn their clients about the risks inherent in the declaration that they must give, much as they would about the cross-undertaking in damages on an interim injunction. They should also warn clients that once goods have been detained, they will need to move quickly to either instigate proceedings or permit the goods to be released;

l C&E has up to 30 days to decide an application. This can be a problem if urgent action is required, and so rights holders should notify as early as possible;

l C&E should be kept up to date with the progress of whether any action is to be taken, and the stage the action has reached. If C&E believes that the matter is not being actively pursued, it may release the goods;

l In national law, the person importing the potentially infringing goods 'is not by reason of the prohibition liable to any penalty other than forfeiture of the goods' (section 89(2) of the Trade Marks Act and section 111(4) of the CDP Act). Since the goods are not going into circulation, there is no claim for damages under the border control regime;

l Both UK and European regimes have short time-limits for the subsistence of an application. Although the CDP Act allows an application to run for five years, one year is more common. The longer the application subsists, the less likely it is in practice that the customs authority will recognise the goods;

l Under the regulation, the owner of the goods may obtain release of the goods by paying a security to the customs authority, sufficient to protect the interests of the rights holder; and

l Quality and accuracy of information is crucial. The more information that can be supplied to C&E about the time and the place at which the infringing goods are expected to arrive, and about the nature of the infringing goods, the more likely it is that C&E will recognise and detain them.



While protecting intellectual property rights will be always be a battle, border control laws can make it easier. Rights-holders should include this weapon in their armouries.