Goods in Transit in International Trade and IP Law

TERRITORIALITY IN TRADE MARK LAW, PROTECTION ACROSS BORDERS and LICENSING

31 October – 1 November 2014 - Faculty of Law, Erasmus University Rotterdam

Dr Henning Grosse Ruse - KhanKing’s College

Goods in Transit under WTO Rules

Outline

• Border Measures under TRIPS

• Seizing Goods in Transit in the EU: from Nokia Mobiles to Generic Drugs

• New EU Rules: Solutions or new problems?

• A Trade Law Perspective on Transits

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IP Enforcement under TRIPS

TRIPS General Enforcement Provisions: Delineating the Trade – IP Relationship

Members shall ensure that enforcement procedures as specified in this Part are available under their law so as to permit effective action against any act of infringement of intellectual property rights covered by this Agreement, including expeditious remedies to prevent infringements and remedies which constitute a deterrent to further infringements.

These procedures shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse. (Art.41:1)

Border Measures under TRIPS

TRIPS Border Measure Provisions

• Scope: Importation of counterfeit trademark goods and pirated copyright goods, Art.51 (Transit optional, fn.13)

• counterfeit trademark goods: goods (incl. packaging) bearing an identical trademark to the trademark validly registered in respect of such goods, or which cannot be distinguished in its essential aspects from such a trademark (fn.14 to Art.51)

• pirated copyright goods: copies made without authorisation in the country of production directly or indirectly from an article if making that copy would constitute copyright- or related right infringement under the law of the country of importation (fn.14 to Art.51)

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Border Measures under TRIPS

TRIPS Border Measure Provisions

TRIPS obliges WTO Members to introduce border measures against the importation of certain, specific forms of IP infringing goods

It equally contains binding safeguards of the interests of importers and good owners and against the abuse of border measures

In essence, the trade context of TRIPS ensures a balance between IP enforcement and global free trade (see Art.V, XX GATT)

Seizing Goods in Transit: Nokia Mobiles

Seizing Goods in Transit: Nokia Mobiles

“When is a fake not a fake? When it's not on sale in Europe”

•“The items in question were on their way from Hong Kong to Colombia -- neither of which are countries within the European Union -- and it was during a brief transitory stop at London's Heathrow Airport that they were inspected and found to be fakes. "Detain these goods!", said Nokia. "Can't", said HMRC” IP Kat, 2009

•See Nokia Corporation v Her Majesty's Commissioners of Revenue & Customs [2009] EWHC 1903 (Ch)

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Seizing Goods in Transit: Generic Drugs

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Seizing Goods in Transit: Generic Drugs

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Seizures of Generics in Transit

• Starting 2008, customs in EU Mbs seized, delayed and returned shipments of generics transiting EU ports on account of suspected patent infringements in the transit country.

• The shipments originated in India and were destined to developing countries such as Brazil, Venezuela, Colombia, Peru or Nigeria.

• The drugs at issue are protected in the EU transit country, but not in the countries of origin or destination.

• In 19 cases, Dutch customs seized transiting generics

• At least 1 seizure involves generics used by UNITAID for HIV/AIDS treatment in Africa

• In all cases, customs in EU Mbs acted pursuant to the EU Regulation 1383/2003 on border measures (BMR)

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WTO Complaints by India and Brazil

• In May 2010, India and Brazil initiated WTO dispute settlement procee-dings against the EU and the Netherlands by requesting consultations over the seizures of generic medicines in transit (WT/DS409/1)

• Apart from alleging inconsistency with several GATT provisions, both India and Brazil argue that the EU and Dutch measures (as such and as applied) violate the TRIPS Agreement (e.g. Artt. 1:1, 41:1, 52, 53:1&2)

• At stake is not the failure to meet minimum standards, but the TRIPS-plus character of the measures

• For the first time in WTO dispute settlement, TRIPS is used as a benchmark for constraining additional (‘TRIPS-plus’) IP protection

• In July 2011, India announces an interim settlement

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Seizures of Goods in Transit in the EU

The Legal Basis for Seizures under the BMR (2003):

•The BMR covers not only the importation of goods suspected of infringing IPRs, but also export and transit (Art.1)

•The types of infringements covered extend not only to counterfeit TM- and © pirated goods, but also other ‘goods infringing an intellectual property right’, including:

“goods which, in the Member State in which the application for customs action is made, infringe (…) a patent under that Member State’s law” (Art.2 (1) c) (i) BMR)

• A Manufacturing fiction? “Proceedings initiated to determine whether an intellectual property rights has been infringed under national law will be conducted with reference to the criteria used to establish whether goods produced in that Member State infringe” IPRs (recital 8)

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Seizures of Goods in Transit in the EU

A Manufacturing fiction? The CJEU in Philips / Nokia:

goods merely in transit in the EU can be classified as IP infringing goods only if it is proven that they are intended to be directed to the EU market. ( no manufacturing fiction! See para.69, 70)

factors that indicate a diversion of those goods to EU consumers include:

(1) the fact that the destination of the goods is not declared (although required);

(2) the lack of precise or reliable information as to the identity or address of the manufacturer or consignor of the goods;

(3) a lack of cooperation with the customs authorities; or

(4) the discovery of documents or correspondence concerning the goods in question suggesting they are liable to remain in the EU.

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Seizures of Goods in Transit in the EU

Any threat for Seizing Generics under the new BMR?

Under the ‘Declaration on the TRIPS Agreement and Public Health’ adopted by the Doha WTO Ministerial Conference on 14 November 2001, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) can and should be interpreted and implemented in a manner supportive of WTO Members’ right to protect public health and, in particular, to promote access to medicines for all.

Consequently, in line with the Union’s international commitments and its development cooperation policy, with regard to medicines, the passage of which across the customs territory of the Union, with or without transhipment, warehousing, breaking bulk, or changes in the mode or means of transport, is only a portion of a complete journey beginning and terminating beyond the territory of the Union, customs authorities should, when assessing a risk of infringement of intellectual property rights, take account of any substantial likelihood of diversion of such medicines onto the market of the Union. (recital 11)

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Seizures of Goods in Transit in the EU

Any threat for Seizing Generics under the draft TM Reg?

In the course of amending substantive TM rules in the EU, the Commission has proposed to expand the scope of TM protection vis-à-vis goods in transit:

5. Without prejudice to WTO rules, in particular Article V of the GATT on freedom of transit, the proprietor of a European Union trade mark shall also be entitled to prevent all third parties from bringing goods, in the context of commercial activity, into the customs territory of the Union without being released for free circulation there, where such goods, including packaging, come from third countries and bear without authorisation a trade mark which is identical to the European Union trade mark registered in respect of such goods, or which cannot be distinguished in its essential aspects from that trade mark. (Art.9 (5) TM Reg, see also Art.10 (5) TM Dir, as agreed in EU Parl on 25 02 2014)

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Seizures of Goods in Transit in the EU

Any threat for Seizing Generics under the draft TM Reg?

With the aim of strengthening trade mark protection and combatting counterfeiting more effectively, and without prejudice to WTO rules, in particular Article V of the GATT on freedom of transit, the proprietor of a registered trade mark should be entitled to prevent third parties from bringing goods into the customs territory of the Member State without being released for free circulation there, where such goods come from third countries and bear without authorisation a trade mark which is essentially identical to the trade mark registered in respect of such goods. This should be without prejudice to the smooth transit of generic medicines, in compliance with the international obligations of the European Union, in particular as reflected in the 'Declaration on the TRIPS agreement and public health' adopted by the Doha WTO Ministerial Conference on 14 November 2001. (recital 22 of the agreed TM Reg)

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Seizures of Goods in Transit in the EU

Open Questions:

How to define the scope of Art.9 (5) TMR? Beyond double identity cases, how to determine whether a trade mark “cannot be distinguished in its essential aspects” from an EU TM? Is it when the sign is “essentially identical to the trade mark registered in respect of such goods” (11)?

What does this imply for (essentially) identical TMs held by distinct enterprises in and outside the EU?

How will this rule affect international trade through the EU, especially generic medicines?

How to apply the qualifier “without prejudice to WTO rules, in particular Article V of the GATT on freedom of transit”? What are the EU’s “international obligations” relating to the “smooth transit of generics”?

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A Trade Law Perspective on Transit

Freedom of Transit, Art.V GATT

• “There shall be freedom of transit through the territory of each contracting party, via the routes most convenient for international transit, for traffic in transit to or from the territory of other contracting parties” (Art.V:2)

• (…) “except in cases of failure to comply with applicable customs laws and regulations, such traffic coming from or going to the territory of other contracting parties shall not be subject to any unnecessary delays or restrictions” (Art.V:3)

• BUT: “Subject to the requirement that such measures are not applied in a manner which would constitute (…) a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent (…) measures necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement relating to (…) the protection of trade marks” (Art.XX d)

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A Trade Law Perspective on Transit

Applying Art.V and Art.XX (d) GATT

• First sentence of Art. V (2) “requires extending unrestricted access via the most convenient routes for the passage of goods in international transit.” (Colombia – Ports of Entry, para.7.401)

• Does Art.V (3) limit Art.V (2) so that transit seizures/detentions are (1) to ensure compliance “with applicable customs laws and regulations”; (2) a “necessary” delay for that purpose? Or is Art.V (3) rather a self-standing obligation which deals with technical customs handling only?

• Art. XX d) GATT:

• Are transit seizures/detentions “necessary” to secure compliance with TM protection in the EU?

• In addition, the extended EU TM protection must be a ‘regulation’ that in itself is “not inconsistent” with GATT!

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A Trade Law perspective on Transit

Compliance with Art.41 TRIPS

IP enforcement procedures “shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse“ (Art.41:1)

Are seizures and temporary detentions of transiting goods barriers to legitimate trade?

How to interpret the term ‘legitimate trade’? Who decides?

• Ordinary Meaning

• Context, incl. systemic integration (Art.31 (3) c) VCLT) of other IL

• Object and Purpose

Concerns expressed in the Non-Paper

In finding the appropriate legislative solution it is also important to ensure that any measures do not have unintended consequences, in particular by placing unnecessary burdens on legitimate businesses and hindering legitimate free trade. (para.1)

The provision does not reflect or respect the realities or nuances of international trade and the existing territorial nature of trade marks. For example the same trade mark can legitimately be held by unconnected companies or individuals in different jurisdictions. (para.9)

It could have an impact on the EU as a trading hub. (…) It is also possible that the provision is incompatible with the intention of Art 206 TFEU [requiring the EU to contribute to the “progressive abolition of restrictions on international trade”]. (…) There remain outstanding questions in respect of the legality of the provision in respect of WTO treaties, in particular GATT. (para.14, 15)

Conclusion

• Distinct conceptions of counterfeit goods blurr deviding lines between IP infringement and health and safety issues

• The new expanded EU TM protection covering the mere transit (without need to show likelihood of trade diversion) may provide effective enforcement remedies, but equally affects the peaceful coexistence of territorially limited TMs

• A trade law perspective on transit seizures raises questions about the consistency of the expanded EU TM protection with GATT and TRIPS

Thank you for your Attention!

Comments and Critique to

hmg35@cam.ac.uk