I. Introduction
Trade in counterfeit, pirated and other goods and products that infringe intellectual property rights (trade marks, geographical indications, patents, designs, copyrights and other related rights) (hereinafter “counterfeit goods”) has multiple effects on business enterprises that sell original goods in the Republic of Croatia and other EU member states.[1] Counterfeit goods reduce the demand for original goods, reduce revenues of legitimate producers, importers, exporters, distributors and sellers (retailers and wholesalers), create illegal competitive advantage for business enterprises free riding on benefits derived from investments (research and development (R&D), trade mark or name goodwill, investment in marketing, etc.) made by legitimate producers, importers, exporters, distributors and sellers.[2] Also, the production, import, export, distribution and sale of counterfeit goods may damage the reputation of trade marks concerned and undermine confidence in the quality of goods because counterfeit goods are defective and/or harmful.[3] This issue is particularly dangerous for small- and medium-sized business enterprises.[4] In addition, counterfeit goods cause significant damage not only to business enterprises that produce, import, export, distribute or sell original goods, but also to economic development, competitiveness of the Croatian and EU markets, as well as the health and safety of consumers in general.[5]
The protection of business enterprises from the production, import, export, distribution or sale of counterfeit goods is primarily carried out by protecting their intellectual property rights on their goods (hereinafter: “intellectual property rights holder”), through criminal, misdemeanour or civil proceedings. In order to strengthen the enforcement of these rights, a comprehensive European plan to prevent the circulation of counterfeit goods has been established, which, inter alia, enables customs measures to be taken in respect of goods suspected of infringing intellectual property rights.[6] The ultimate goal is to prevent the entry of counterfeit goods on the market of the Republic of Croatia and the EU, without impeding legitimate trade between countries.[7]
By acceding to the European Union, the Republic of Croatia became part of the customs territory of the European Union, and due to its geographical position it also became an important entry point of goods released for free circulation in Member States of the European Union.
According to the Report on the EU customs enforcement of intellectual property rights: Results at the EU border, 2018[8], customs authorities made over 69 000 detentions in 2018, consisting of a total of 26.7 million articles. The retail value of detained goods in the EU is estimated at more than EUR 738 million.[9]
Overall, China is the main country of origin for counterfeit goods arriving in the EU. For certain product categories, other countries are the main countries of origin, in particular: Northern Macedonia for alcoholic beverages; Turkey for other beverages, perfumes and cosmetics; Hong Kong, China for watches, mobile phones and accessories, ink cartridges and toners, CDs/DVDs and labels, tags and stickers; India for computer equipment; Cambodia for cigarettes; and Bosnia and Herzegovina for packaging material.[10]
Among the detained goods, cigarettes accounted for 15.6 % of the overall amount of detained articles, followed by toys (14.2 %), packaging material (9.4 %), labels, tags and stickers (8.9 %) and clothing (8.6 %).[11] Products potentially dangerous to the health and safety of consumers (i.e. suspected trade mark infringements concerning food and beverages, body care articles, medicines, electrical household goods and toys) accounted for 36.8 % of the total amount of detained articles.[12]
In 2018, 82.9 % of the detention procedures were started by competent customs authorities, the goods were destroyed after the owner of the goods and the intellectual property rights holder agreed on destruction.[13] In 3.9 % of the detentions, a court case was initiated to determine the infringement and, in 2.8 % of cases, the goods were dealt with as part of criminal proceedings.[14] Furthermore 77 % of the detained articles were destroyed or were subject to court proceedings.[15] However, 22 % of the detained articles were released because the intellectual property rights holder did not respond to the notification by customs authorities (8 %), or the articles were eventually found to be original goods (14 %), or no infringement was established (0.3 %).[16]
In order to protect themselves from the consequences of the production, import, export, distribution and sale of counterfeit goods, business enterprises have the opportunity to inform and/or initiate certain proceedings before the competent authorities (Customs Administration, the police, State Attorney’s Office) in order to initiate investigations, misdemeanour and criminal proceedings. Also, business enterprises may file individual lawsuits against producers, importers, exporters, distributors or sellers of counterfeit goods in order to protect their rights and claim compensation for damages.
As the competent customs authorities have a limited amount of information at their disposal, it is possible for counterfeit goods to proceed through customs control and supervision unnoticed. Therefore, the identification and detection of counterfeit goods intended for free circulation in the Republic of Croatia or the EU is provided for and facilitated by submitting the necessary requests and notifications to the competent customs authorities.
In this article we aim to provide an overview of the regulation of the so-called national and Union applications, by way of which the competent customs authorities are supplied with prior information necessary in order to protect business enterprises from counterfeit goods, as well as customs proceedings relating to counterfeit goods initiated by submitting the above-mentioned applications and the measures which the customs authority may take ex officio in respect of counterfeit goods.
II. Which intellectual property (IP) rights are protected? Which goods may be subject to enforcement action? Provisions regulating the customs authorities’ action in relation to intellectual property rights infringements are laid out in the Regulation (EU) No 608/2013 of the European Parliament and of the Council of 12 June 2013 concerning customs enforcement of intellectual property rights and repealing Council Regulation (EC) No 1383/2003 (the “Regulation (EU) 608/2013”). In accordance with the Regulation (EU) 608/2013, action is to be taken when infringement of the following intellectual property rights is suspected: It should also be noted that the customs authorities’ actions provided for in the Regulation (EU) 608/2013 may be undertaken only with regard to goods which are liable to customs supervision or control. Those are particularly the goods: However, the Regulation (EU) 608/2013 does not apply to goods carried by passengers in their personal luggage, provided that they are for their personal use and there are no indications that commercial traffic is involved. [19] Furthermore, since illegal parallel trade, i.e. goods manufactured with the consent of the right-holder but placed on the market for the first time in the EEA without his consent, and overruns, i.e. goods manufactured by a person duly authorised by a right-holder to manufacture a certain quantity of goods, but manufactured in excess of the quantities agreed, are considered to be manufactured as genuine goods, they are also excluded from the scope of Regulation (EU) 608/2013.[20]
III. National application and Union application Intellectual property rights holders can submit a national or Union application to the competent customs authority. By submitting a national application, the applicant requests the customs authorities of a Member State to take action on the territory of that Member State.[21] Union application means an application lodged in one Member State requiring the customs authorities of that Member State and one or more other Member States to take action in their respective Member State.[22] Union application may only be submitted with respect to intellectual property rights based on Union law producing effects throughout the Union.[23] The list of persons and entities entitled to submit a national or Union application is laid down in Article 3 of Regulation (EU) 608/2013, as follows[24]: indication provided for in National law or representatives of such groups and operators entitled to use a geographical indication, as well as inspection bodies or authorities competent for such a geographical indication property right has been infringed Applications are to be submitted to customs departments designated by each Member State.[25] If the application is to be submitted to Croatian customs authority, it should be submitted to the Central Office of the Croatian Customs Administration (Sector for Customs Systems), on a prescribed form.[26] Having in mind that the proper functioning of the customs enforcement procedure depends on the quality of information provided to the customs authorities[27], the applicant is required to provide information listed in the application form, including the following: – details concerning the applicant, – documents providing evidence that the applicant is entitled to submit the application, – the intellectual property right or rights to be enforced, – specific and technical data on the authentic goods, including markings such as bar-coding and images where appropriate, – the information needed to enable the customs authorities to readily identify the goods in question, – information relevant to the customs authorities’ analysis and assessment of the risk of infringement of the intellectual property rights concerned, such as the authorised distributors.[28] Upon receiving the complete application, the competent customs department notifies the applicant of its decision granting or rejecting the application within 30 working days.[29] In the event of rejection, the customs department provides reasons for its decision and information on the appeal procedure.[30] If the application is granted, pursuant to Art. 2 (13) of Regulation (EU) 608/2013, the applicant is further referred to as the “holder of the decision”.[31] The decision granting a national application or Union application takes effect in the Member State in which the national application or Union application was submitted from the day following the date of adoption, while the decision granting a Union application takes effect in all other Member States where action by the customs authorities is requested on the day following the date on which the customs authorities are notified thereof.[32] The period during which the customs authorities are to take action may not exceed one year from the day following the date of adoption of the decision.[33] However, that period may be extended for a further one-year period at the request of the holder of the decision, submitted to the competent customs department at least 30 working days before the expiry of the period to be extended.[34]
Persons and entities
National application
Union application
Intellectual property rights holders
X
X
Intellectual property collective rights management bodies
X
X
Professional defence bodies
X
X
Groups of producers of products with a geographical indication provided for in Union law or representatives of such groups and operators entitled to use a geographical indication as well as inspection bodies or authorities competent for such a geographical indication
X
X
Persons or entities authorised to use intellectual property rights, which have been authorised formally by the right-holder to initiate proceedings in order to determine whether the intellectual property right has been infringed
X
Groups of producers of products with a geographical
X
Holders of exclusive licenses covering the entire territory of two or more Member States, formally authorised in those Member States by the right-holder to initiate proceedings in order to determine whether the intellectual
X
X
IV. Taking action ex-officio The customs authorities may also suspend the release of non-perishable goods or detain them even if no application was submitted, in case that they identify goods suspected of infringing an intellectual property right.[35] However, if they do not identify any person or entity entitled to submit an application concerning the alleged infringement of intellectual property rights within one working day from the suspension of the release or the detention of the goods or if they do not receive a national application or Union application, or where they reject such an application, the customs authorities will release the goods or put an end to their detention immediately after completion of all customs formalities.[36]
V. What happens if goods suspected of infringing intellectual property right are detected? In the event that the customs authorities identify goods suspected of infringing an intellectual property right covered by a decision granting the application, they are to: Upon receiving the notification of suspension or detainment of goods, the holder of the decision and the declarant or the holder of the goods are given the opportunity to inspect the goods in question, and the customs authorities may take samples that are representative of the goods.[39] Such samples may be provided to the holder of the decision and strictly for the purposes of analysis and the subsequent procedure in relation to counterfeit goods.[40] It must be noted that any analysis of those samples is carried out under the sole responsibility of the holder of the decision.[41]
VI. Will the detected goods be destroyed? Should any further proceeding be initiated? Goods suspected of infringing an intellectual property right may be destroyed under customs control, without determining whether an intellectual property right has been infringed, if: All confirmations must be made within ten working days, or three working days in the case of perishable goods, of notification of the suspension of the release or the detention of the goods.[43] Where the declarant or the holder of the goods has not confirmed his agreement to the destruction of the goods nor notified his opposition to the customs authorities, the customs authorities may deem the declarant or the holder of the goods to have confirmed his agreement to the destruction of those goods.[44] If aforementioned conditions have not been met, the customs authorities shall grant the release of the goods or put an end to their detention.[45] However, even if the customs authorities have not received within the time limit all the necessary confirmations from the holder of the decision or where the confirmation of their agreement to the destruction of goods from the declarant or the holder of the goods may not be deemed to have been given, the customs authorities shall not authorize the release of the goods or put an end to their detention if the holder of the decision has initiated a proceeding to establish the infringement of intellectual property rights within the abovementioned set deadlines.[46] The destruction of the goods is carried out under customs control and under the responsibility of the holder of the decision.[47] Pursuant to Art. 52 (1) of the Implementation of Customs Legislation of the European Union Act (Official Gazette 40/2016, hereinafter: “Implementation of Customs Legislation of the European Union Act”), the cost of destruction is to be borne by the holder of the decision.[48] Samples may be taken by competent authorities prior to the destruction of the goods, which may be used for educational purposes.[49] Finally, if the customs authorities have not been duly informed on the initiation of proceedings to determine whether an intellectual property right has been infringed, they will grant the release of the goods or put an end to their detention immediately after completion of all customs formalities.[50]
VII. Early release Even if the customs authorities have been notified of the initiation of proceedings to determine whether a design, patent, utility model, topography of semiconductor product or plant variety has been infringed, the declarant or the holder of the goods may request the customs authorities to release the goods or put an end to their detention before the completion of those proceedings.[51] Such request shall be granted if the following conditions are met:
VIII. Liability and Costs Pursuant to Article 29 of Regulation (EU) 608/2013, where requested by the customs authorities, the holder of the decision will have to reimburse the costs incurred by the customs authorities, from the moment of detention or suspension of the release of the goods, including storage and handling of the goods as well as the cost of the destruction of goods.[53] In accordance with Article 51 of Implementation of Customs Legislation of the European Union Act, during the suspension of the release of goods or detention of goods, the responsibility and costs of storage, keeping, handling and maintenance of goods shall be borne by the declarant or the holder of the goods.[54] If legal proceedings in order to determine whether an intellectual property right has been infringed are initiated, the responsibility and costs of storage, keeping, handling and maintenance of the goods shall pass on to the holder of the decision from the moment when the customs authorities are notified.[55] The holder of the decision has the right to claim reimbursement of all the costs incurred within the court proceedings initiated in order to determine the infringement of intellectual property rights.[56] In addition, the holder of the decision has the right to claim compensation for the damage thus caused. In case of non-fulfillment of the obligation to bear the costs, the customs authority will revoke the national approval or suspend the action of the Customs Administration.[57] In such case, a new national application may be granted or the suspension of action lifted only after the holder of the decision reimburses all of the costs previously incurred.[58] Where a procedure duly initiated pursuant to Regulation (EU) 608/2013 is suspended due to an act or omission on the part of the holder of the decision or where the goods in question are subsequently found not to infringe an intellectual property right, the holder of the decision shall be liable towards any holder of the goods or declarant, who has therefore suffered damages.[59]
End notes [1] https://ec.europa.eu/taxation_customs/business/customs-controls/counterfeit-piracy-other-ipr-violations/a-serious-problem-everyone_en (accessed on 8 November 2020 at 11 AM) [2] Ibid. [3] Ibid. [4] Ibid. [5] Ibid. [6] Council Resolution of 25 September 2008 on a comprehensive European anti-counterfeiting and anti-piracy plan, OJ C 253 of 4 October 2008, page 3. [7] Regulation (EU) No 608/2013 of the European Parliament and of the Council of 12 June 2013 concerning customs enforcement of intellectual property rights and repealing Council Regulation (EC) No 1383/2003, OJ L 181, 29 June 2013, pages 15–34 (further: „Regulation (EU) No 608/2013”), recitals 1-2. [8] Report on the EU customs enforcement of intellectual property rights: Results at the EU border, 2018, Luxembourg: Publications Office of the European Union, 2019, available on: https://ec.europa.eu/taxation_customs/sites/taxation/files/2019-ipr-report.pdf, accessed on 26 May 2020 (hereinafter: „Report”). [9] Ibid., page 6. [10] Ibid. [11] Ibid. [12] Ibid. [13] Ibid. [14] Ibid. [15] Ibid. [16] Ibid. [17] Regulation (EU) 608/2013, Art. 2 (1) [18] Ibid., Art. 1 (1) [19] ibid., recital 4, Art. 1 (4) [20] Ibid., recital 6, Art. 1 (5) [21] Ibid., Art. 2 (10) [22] Ibid., Art. 2 (11) [23] Ibid., Art. 4 (1) [24] Customs enforcement of intellectual property rights in the EU, manual for the completion of applications for action and extension requests Regulation (EU) No. 608/2013 of the European Parliament and of the Council of 21 June 2013 Commission Implementing Regulation (EU) No. 1352/2013 of 4 December 2013, August 2014., https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/customs/customs_controls/counterfeit_piracy/right_holders/manual-application-for-action_en.pdf, page 6 (accessed 8 November 2020 at 5:45 PM) [25] Ibid. Art. 5 [26] Customs Service Act, Official Gazette 68/2013, 30/2014, 115/2016, 39/2019, 98/2019, Art. 11. (1.). [27] Report, page 8. [28] Regulation (EU) 608/2013, Art. 6 (3) [29] Ibid., Art. 7 (2) [30] Ibid., Art. 9 (1) [31] Ibid., Art. 2 (13) [32] Ibid., Art 10 [33] Ibid., Art. 11 (1) [34] Ibid., Art. 12 (4) [35] Ibid., Art. 18 (1) [36] Ibid., Art. 18 (4) [37] Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code, OJ L 269, 10 October 2013, p. 1–101, Art. 5 (15) [38] Regulation (EU) 608/2013, Art. 17 [39] Ibid., Art. 19 [40] Ibid., Art. 19 [41] Ibid., Art. 19 [42] Ibid., Art. 23 (1) [43] Ibid., Art. 23 (1) [44] Ibid., Art. 23 [45] Ibid., Art. 23 (5) [46] Ibid., Art. 23 (1, 3) [47] Ibid. [48] Implementation of Customs Legislation of the European Union Act, Official Gazette 40/2016 (further: Implementation of Customs Legislation of the European Union Act), Art. 52 (1). [49] Regulation (EU) 608/2013, Art. 23 (2) [50] Ibid., Art. 23 (5) [51] Ibid., Art. 24 (1) [52] Ibid., Art. 24 (2) [53] Ibid., Art. 29 [54] Implementation of Customs Legislation of the European Union Act, Art. 51 (1) [55] Ibid., Art. 51 (2) [56] Regulation (EU) 608/2013, Art. 29 [57] Implementation of Customs Legislation of the European Union Act, Art. 54 (1) [58] Ibid., Art. 54 [59] Regulation (EU) 608/2013, Art. 28
For all further questions regarding the submission of a request to the competent customs authority, the initiation of appropriate court proceedings or other issues related to the protection of intellectual property rights, please contact us on our email: info@vukina.hr.
Date: 18 November 2020
Mislav Vukina,
Attorney at law
Josipa Kovačević,
Associate
