Nokia applied for a judicial review of Her Majesty's Commissioners of Revenue and Customs' ("HMRC") decision not to continue to detain or suspend the release of a shipment of mobile phones and accessories, which Nokia believed to be counterfeit. Its application has been refused.
In July 2008, HMRC stopped a shipment of goods being transported via Heathrow airport from Hong Kong to Colombia. The shipment contained four hundred mobile phone handsets, batteries, manuals, boxes and hands free kits all bearing NOKIA trade marks. HMRC sent samples to Nokia who then determined that they were counterfeit. Nokia asked HMRC to seize the goods in accordance with Council Regulation 1383/03 (the "Counterfeit Goods Regulation"). After taking legal advice, HMRC refused to do so as it did not consider that the goods could be deemed "counterfeit" within the meaning of the Counterfeit Goods Regulation, on the basis that there was no evidence that the goods would enter the EU market.
Nokia applied for judicial review of the decision.
The decision by HMRC centred on the definition of "counterfeit goods" in the Counterfeit Goods Regulation and whether it encompasses goods which are in transit only, in circumstances where there is no real chance of them being released onto the EU market.
HMRC argued that for goods to be "counterfeit goods" under the Counterfeit Goods Regulation they must infringe someone's trade marks in the UK. Trade mark infringement under the Trade Marks Directive requires use of the trade mark to be "in the course of trade". Such use requires the goods to be put on the market. As a result, HMRC decided that the goods were not "counterfeit goods", even if they were fake, as they were in transit only and therefore they had no power to seize them.
Nokia argued that HMRC was taking an unduly restrictive approach in its interpretation of the Counterfeit Goods Regulation and that it was clearly intended to apply to goods in transit.
Nokia also advocated the use of the "manufacturing fiction". This would require HMRC, when applying the Regulation, to assume that the goods were manufactured in the UK and to have been released into free circulation in the UK when deciding whether or not to detain goods.
Mr Justice Kitchin considered the relevant ECJ case law and found four principles:
- Infringement of a registered trade mark requires goods to be placed on the market and that goods in transit subject to suspensive customs procedures do not satisfy this requirement. (Mr Justice Kitchen relied on L'Oréal SA v eBay International AG [2009] EWHC Civ 1094 in this regard. To see our Law-now on this decision please click here.
- The position is different if the goods in the transit procedure are subject to the act of a third party which necessarily entails their being put on the market ("the Montex exception"). The burden of establishing this rests on the trade mark proprietor.
- The mere risk that the goods may be diverted on to the market is not sufficient to justify the conclusion that the goods have been or will be put on the market.
- The Counterfeit Goods Regulation has not introduced a new criterion for the purposes of ascertaining the existence of an infringement of a registered trade mark or to determine whether there is a use of the mark which is liable to be prohibited.
In reaching his conclusion that goods in transit were not "counterfeit goods", he commented that he accepted that the result was not satisfactory and that he hoped that the result provoked "a review of the adequacy of the measures available to combat the international trade in fake goods by preventing their shipment through member states".
This decision is bad news for trade mark owners and confirms a loophole which is open to those dealing in fake goods. Trade mark owners will be keen to see legislation enacted that deals with this loophole.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 05/08/2009.