Border Enforcement of Intellectual Property Rights

TWINNING LIGHT PROJECT

Border Enforcement of Intellectual Property Rights

TR2012/023-405

ACTIVITY 2

To Conduct a Gap and Needs Analysis

Final Report

IPA 2012

TWINNING LIGHT PROJECT

Border Enforcement of Intellectual Property Rights

EU Twinning Project Number: TR2012/023-405

12th March 2016

MS Expert: Ioannis Kikkis

Table of Contents

Introduction

A. Subject matter

B. Scope of the new border measures

(1) Customs status of the goods

(2) Intellectual property rights covered

(3) Type of infringements covered

(4) Exclusions: goods contained in traveller’s luggage

C. Procedure

(1) Ex officio actions by customs authorities

(2) Application for action by customs authorities

(a) “Union” versus “national” applications

(b) Persons entitled to submit an application

(c) Submission and processing of applications

(d) Decisions granting or rejecting applications for action and period during which the customs authorities are to take action

(e) Extension of the period during which the customs authorities are to take action

(f) Amending the decision with regard to IPRs

(g) Notification obligations of the competent customs department and of the holder of the decision granting the application

(3) Suspension of the release or detention of the goods following the grant of an application

(4) Inspection and sampling of goods whose release has been suspended or which have been detained

(5) Permitted use of certain information by the holder of the decision

(6) Sharing of information and data between customs authorities

(7) Simplified procedures

(8) Specific procedure for the destruction of goods in small consignments

(9) Initiation of proceedings

D. Release of goods

E. Liability

(1) Liability of customs authorities

(2) Liability of right-holders

F. Storage, destruction and costs

(1) Storage costs

(2) Destruction costs

(3) Recovery of costs

G. Sanctions

H. Processing and exchange of data

I. Mutual assistance

J. Entry into force and transitional provisions

Conclusion

Introduction

The overall objective of the Twinning Light Project Border Enforcement of Intellectual Property Rightsis to establish a modernised and effective system of border protection regarding Intellectual Property Rights (IPR)in a way to ensure operational control throughout Turkish Customs territory.

The objective of Activity 2 is to conduct a detailed comparison of the existing IPR Customs legislation in Turkey with the relevant EU instruments, specifically EU Regulation No. 608/2013 and EU Regulation No. 1352/2013.

The EU Regulation No. 608/2013 concerns the commercial aspects of IPRs in that it deals with measures enabling customs to enforce IPRs at the border on goods that are internationally traded. It repeals Council Regulation No. 1383/2003. Whilst EU Regulation No. 1352/2013 establishes the forms identified in EU Regulation No. 608/2013.

Shortly after the adoption of the new Action Plan, a sensitive aspect of the Council Regulation No. 1383/2003 found itself being discussed at the WTO and the CJEU. On 29 May 2010, India and Brazil each filed a request for consultation at the WTO against the EU (thus opening the way to the setting up of a dispute settlement panel under the WTO Dispute Settlement Understanding), alleging breaches of Articles V and X of GATT 1994 and of various provisions of the TRIPS Agreement. In a nutshell, they claimed that the Regulation undermined the freedom of transit principle enshrined in the GATT, in that it had allowed Dutch Customs to detain several shipments of generic medicines (allegedly lawfully) manufactured in India and en route to Latin America, Oceania, and Africa (for allegedly legal use) while in transit through the Netherlands-where the products were protected by patents. In the meantime, the right of customs officers to stop goods in the transit under the Regulation, even where there is no evidence that the goods are counterfeit at the point of origin or destination, has been heavily debated before the CJEU in the Montex, Philips and Nokia cases[1]. These developments increased the pressure for a speedy review of the Regulation, to clarify its objectives and scope so as to increase legal certainty.

The legal basis for the EU Regulation 608/2013 is Article 207 TFEU which essentially reproduces the wording of Article 133 EC-on the basis of which Regulation 1383/2003 had been adopted- and empowers the Commission to adopt measures which implements the EU’s common commercial policy. Pursuant to Article 207, the commercial aspects of IP form an integral part of the EU’s common commercial policy.

The rationale behind the system remains unchanged.

Enforcing IPRs at the border, wherever the goods are, or should have been, under “customs supervision”… makes good use of resources. Where goods detained by Customs at the border, one legal proceeding is required, whereas several separate proceedings would be required for the same level of enforcement for goods found the market, which have been disaggregated and delivered to retailers.

The new Regulation pursues the following six objectives:

• To widen the scope of the current legal framework by including new IPRs, as well as new types of infringements to IPRs already covered by Regulation 1383/2003;
• To harmonise some procedures, inter alia, by making the so-called “simplified procedure” mandatory in all EU MS;
• To ensure a more balanced outcome for all categories of (natural or legal) persons affected by border measures;
• To ensure “legal clarity of the provisions” of the Regulation, and, among others, to clarify its impact on other EU and MS’ legislation on the determination of IPR infringements;
• To introduce a simplified procedure for destruction with respect to small consignments;
• To take into account economic, commercial and legal developments.

In a nutshell, the Proposal purports to offer more robust enforcement than under current legislation, while ensuring the protection of the interests of legitimate traders, thereby enhancing the legitimacy of customs actions.

A. Subject matter

The Regulation has no ambitions other than to set out the conditions and procedures for action by the customs authorities who suspect that goods under their supervision infringe IPR.

By pointing out that the sole purpose of the Regulation is to set forth a procedural framework for the customs enforcement of IPR, the Commission makes sure that it cannot be construed as containing any substantive provision influencing the determination of IPR infringements. The 10th Recital is crystal-clear in this respect:

This Regulation solely contains procedural rules for customs authorities. Accordingly, this Regulation does not set out any criteria for ascertaining the existence of an infringement of an intellectual property right.

Article 1 (6) states that:

This Regulation shall not affect national or Union law on intellectual property or the laws of the Member States in relation to criminal procedures.

The enforcement of IPR at the borders will continue to require the application of a “chain of Directives and Regulations”: while the procedures enabling the customs authorities to prevent the movement of goods which they suspect of infringing IPR are laid down in the Regulation on customs enforcement of IPRs, the determination of IPR infringements will be exclusively based on the EU’s substantive IP legislation or the national laws of the MS. Once it has been determined that goods infringe IPRs, it will be up to the Courts or other competent authorities in the MS to apply the measures laid down by their national laws- which in turn should be consistent with the Enforcement Directive and TRIPs. Thus, unlike Regulation 1383/2003, there is no chapter in the new Regulation containing “provisions applicable to goods found to infringe IPR”. Except in cases where one of the simplified procedures set forth in the new Regulation can be applied, it will be up to the courts to determine whether such goods will be allowed to enter or leave the EU customs territory, or whether they must be forfeited to the exchequer, destroyed, or disposed of outside commercial channels.

The clear delineation of the subject matter of the new Regulation unquestionably represents a major achievement.

Turkish legislation does not seem to contain a similar provision to Article 1 paragraph 6. Such a provision shall be included in order to ensure that Customs legislation cannot be construed as containing any substantive provision influencing the determination of IPR infringements.

B. Scope of the new border measures

(1) Customs status of the goods

In 2008, only 43% of all goods suspected of infringing IPR intercepted by Customs in the MS at the EU external border were detained at import. Over 60% were blocked while in transit or under a customs warehousing procedure. In 2010, checks on goods in transit decreased to less than 7%. Customs controls on the trans-shipped goods, goods in the process of being exported, and goods placed under a customs warehousing procedure represented together 1% of all cases (DG TAXUD (n. 5)).

Excluding suspensive customs procedures (and, in particular, external transit and customs warehousing) as well as trans-shipment, from the Scope of the Regulation would have sent the wrong signal to infringers, whilst seriously undermining the efficiency of the Regulation to tackle IPR infringements in a global economy. Indeed, it would have allowed infringers to pre-empt application of the Regulation by systematically placing their goods under a suspensive procedure, and then changing their customs status.

Article 1 paragraph 1 defines “Customs supervision” by reference to the Community Customs Code. The ability of Customs to check goods, with a view to enforcing IPR, in all situations where the goods are under their supervision in the EU customs territory is maintained. Pursuant to Article 37 paragraph 1 of the Community Customs Code, goods are subject to customs supervision from the time of their entry into the EU customs territory. Article 37 paragraph 2 further specifies that such goods remain under customs supervision for as long as it is necessary to determine their customs status, if appropriate, and in the case of non-Community goods, until their customs status is changed, they enter a free zone or a free warehouse, or they are re-exported or destroyed. As a consequence, Customs would be entitled under the new Regulation to detain non-Community goods not only at the time of the customs declaration-if any- but also thereafter, that is, as long as they remain non-Community goods.

The Regulation empowers Customs Officers to take action whenever suspicious goods should have been subject to their supervision. “Smuggling” situations are also circumstances in which customs authorities are able to act under the Regulation. (already the case under Regulation 1383/2003).

Thus, the Regulation continues to cover all possible circumstances in which goods cross an external border of the EU. This includes goods manufactured or originating in non-EU countries, entering the EU customs territory, regardless of whether they are being trans-shipped, released for free circulation in the EU, placed under a suspensive procedure, or placed in a free zone or warehouse. This also covers the cases where goods suspected of infringing IPR are in the process of being exported, re-exported, or otherwise leaving the EU customs territory.

It is necessary to verify whether the wording of the Turkish regulation “goods which are subject to customs approved treatment or use” covers the situations described in Art. 1, par. 1, a), b) and c), i.e. goods in the following situations:

(a) when declared for release for free circulation, export or re- export;

(b) when entering or leaving the customs territory of the Union; and

(c) when placed under a suspensive procedure or in a free zone or free warehouse.

Article 51 of TRIPs only relates to customs checks on imported goods and does not compel WTO members to apply border checks to goods in transit. But TRIPs does not preclude the signatories from empowering their customs authorities to act against such goods. TRIPs is a minima agreement and do not preclude the signatories from setting their own national border measures system, which may exceed the thresholds laid down in TRIPs.

The EU’s Customs Code (art. 58 par. 2) also entitles the MS to subject non-Community goods to any prohibitions or restrictions that can be identified on grounds of, inter alia, the protection of industrial or commercial property, including “certain IPRs”.

The freedom of transit principle was never intended to apply to illicit trade, including trade in goods which infringe IPR. Thus, the scope of the Regulation respects the TRIPs agreement and also takes into consideration the core principles laid down in the GATT.

Since customs authorities are only empowered to take action against goods under supervision which they suspect of infringing IPRs, they are no longer entitled to intervene under the Regulation once the goods have been released into free circulation within the EU (meaning that all customs formalities have been fulfilled and that the applicable customs duties have been paid). It should be noted, however, that when goods are released into free circulation at a reduced or zero rate of duty, on account of their end-use, they do remain customs supervision. Since the border measures does not aim to apply to goods in free circulation, the Regulation explicitly mentions that the Regulation will not apply to goods in free circulation under the end-use regime. However, this does not preclude actions by Customs against goods which have been entered for release for free circulation, i.e. that have not yet been cleared by Customs. In this case, the Customs authorities will need to inquire whether or not such goods can reasonably be suspected of infringing IPR.

The exception of Goods released for free circulation under the end use regime from the scope of EU regulation 608/13 does not seem to exist in the Turkish Customs Code.

(2)Intellectual property rights covered

The Regulation is widening the scope of border measures system to include IPR which hitherto did not form part of it. According to Article 2 paragraph 1 Customs checks should be extended to goods suspected of infringing: a) trade names (in so far as they are protected as exclusive property rights under national law), b) topographies of semiconductor products, c) utility models.

As far as trade names are concerned, Article 9 of the Paris Convention had already empowered the customs authorities of its signatories to adopt border measures. Although the scope of trademark rights in some MS does embrace uses of a conflicting sign as a trade name (which is allowed by Article 10 paragraph 6 of the Trademark Directive), this is not the case in all Member States. Therefore, the mere reference in Regulation 1383/2003 to “goods infringing a trade mark” was not entirely satisfactory to prevent the movement of all goods unlawfully bearing a trade name throughout the EU.

Some EU MS (eg. Latvia and the Slovak Republic) already offered protection for topographies of semiconductor products at the EU external border.

Although in the course of public consultation on the review of the Regulation, numerous right holders asked for border measures to be extended to unregistered well-known trademarks (in the sense of Article 6bis of the Paris Convention) it is doubtful that this goal is achieved by the new Regulation. Indeed even though the EU is member of TRIPS and is therefore, according to article 2 pararagraph 1 of TRIPS, bound to comply with Article 6bis of the Paris Convention (1967), it would presumably not be correct to state that such unregistered well-known trademarks are covered by the Regulation. An inclusion in Article 2 paragraph 2 of a reference to unregistered well-known trademarks in the sense of Article 6bis of Paris Convention would have been appropriate to enable Customs to enforce the rights conferred by such trademarks.

Next to the moulds and matrices, which were already part of Regulation 1383/2003, the Regulation also aims to empower Customs to take action against:

…devices, products or components which circumvent any technology, device or component that, in the normal course of its operation, prevents or restricts acts in respect of works which are not authorized by the right holder of any copyright or related right and which infringe an IPR under the law of that MS.

This is yet another welcome development. Over the last few decades, customs authorities have proved to be very effective in using the regulation to prevent the movement of pirated copies of video-games or audio-visual recordings shipped in physical form. However, counterfeiting and piracy have become increasingly widespread on the internet. In the video-game, business software, film and music sectors nowadays, illicit products are not only distributed in physical form by carriers; they can also be downloaded directly from the internet and used on personal computers, or played on the appropriate players or consoles through the use of circumvention devices.

Although online piracy is increasing, this does not mean that customs officers no longer have a role to play in this area. Their competences needed to be re-examined and re-defined in the light of these new trends and of the latest technological developments.

The use of circumvention devices in the sense of Article 6 paragraph 2 of Directive 2001/29/EC and Article 7 paragraph 1 of Directive 2009/24/EC is directly and drastically contributing to the proliferation of internet piracy. The prejudice caused to the video-game industry as a result of the importing and sale of such devices is very significant. A recent report from the International Intellectual Property Alliance (IIPA) found that: i) 10 million illegal copies of video-games were downloaded worldwide in December 2009, ii) European countries have the highest volumes of unauthorized game downloads and iii) mod-chips and game-copiers devices are the largest obstacle to the global fight against game piracy.

The success of the civil and criminal litigation campaigns pursued by right-holders against websites offering such devices for sale have driven many of them to move outside the EU, where European consumers continue to buy them. Hence, the role of the customs authorities in preventing their import and distribution into the EU is becoming increasingly crucial.

It was consistent with the rationale behind Directives 2001/29/EC and 2009/24/EC-and had become urgent-to broaden the scope of the EU Border Measures Regulation, so as to expressly include illicit circumvention devices.

In respect of trademarks, the new Regulation, as already did Regulation 1383/2003, explicitly empowers customs authorities to intervene against counterfeit “trade mark symbols” (including logos, labels, stickers, brochures, instructions for use or guarantee documents bearing such a symbol), even if they were shipped separately from the goods for which they were destined. The same applies to “packaging materials bearing the trade marks of counterfeit goods, presented separately”. In 2010, over 8% of all articles suspected of infringing IPR detained by Customs at the EU’s external border consisted of labels, tags, stickers and packaging materials.