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Companies Must Go to Court Each Time They Want to Stop Counterfeit Shipments

Issued: August 01 2009

Companies will have to go to court every time they want counterfeit goods to be stopped at the UK’s borders following a policy change that could send costs soaring for intellectual property rights holders, according to lawyers at Pinsent Masons in London, who wrote of the change in their law blog.

The change means that a rights holder will need to take court action within 10 days every time it wants suspected counterfeit goods stopped from entering the UK, where before only a company statement was sufficient as proof that goods were fake, the firm wrote.

Her Majesty’s Revenue and Customs (HMRC) has reversed its policy on the burden of proof in relation to goods stopped at borders. It will now release goods unless immediate court action is taken,” they said.

HMRC said that it will only seize goods permanently if ordered to do so by a court. It will detain them for 10 days initially, and up to 20 days on further application. If no court case is taken by then the goods will be released, it said.

An HMRC spokeswoman told that the change was the result of HMRC's loss of a court case in the matter.

HMRC has written to businesses to say that has “been advised” that it was not complying with a European Council Regulation on how customs officials should deal with goods suspected of infringing IP rights.

“The UK implementation of [the Regulation] provides for procedures similar to, but not identical with, those required under the Council Regulation,” HMRC told businesses in a letter. “We have been advised that departure from the precise requirements of the Council Regulation is not permissible as the Regulation is directly applicable within the UK. We are therefore obliged to modify our procedures to align fully with the requirements of the Council Regulation.”

Until now HMRC has accepted a witness statement from a company as confirmation that seized goods infringe that company's IP rights, said Pinsent Masons. It will no longer do so and will only seize them on the orders of the court.

Iain Connor, an IP partner at Pinsent Masons, said the change could result in fake goods being sold in the UK in much higher numbers than before.

“The key point here is that counterfeiters, when told that goods have been detained, will be able to tell rights holders to sue them or they’ll be getting their goods back,” he said. “If they don’t, after 10 days these goods will enter the market.”

John MacKenzie, a Pinsent Masons solicitor advocate, says the change in procedure “changes the nature” of the Customs activity.

“Previously they were seizing the goods, but now they are just detaining them on behalf of the rights owner, and it is up to the rights owner to take the case to court, otherwise the goods are let go,” he said. “The solution for brand owners is to establish a process to quickly and cost efficiently identify fake goods and get into court. Otherwise the cost of dealing with fake goods at an early stage is likely to be prohibitive.”


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